Office Depot, OfficeMax in talks to merge; deal seen soon

Mon Feb 18, 2013 10:44pm EST
 
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By Nadia Damouni and Dhanya Skariachan

NEW YORK (Reuters) - Office Depot Inc ODP.N, the No.2 U.S. office supply retailer, is in advanced talks to merge with smaller rival OfficeMax Inc OMX.N and a deal could come as early as this week, a person familiar with the matter said on Monday.

Both companies, which trail industry leader Staples Inc (SPLS.O: Quote), are under much pressure from investors to boost profitability as well as shareholder value, and a merger would help them to cut costs, close stores and boost their clout with suppliers.

The deal is expected to be structured as a stock-for-stock transaction, the person said, but the source also warned that the talks could still fall apart.

Office Depot has a market capitalization of $1.1 billion while OfficeMax has a market value of $932 million.

Analysts have long called for consolidation in what they see as a cluttered sector, in which sales crumbled during the global financial crisis. Office supply stores are also fighting a battle for relevance, with shoppers increasingly buying their paper, toner and technology online or at mass merchants.

Office Depot declined to comment on the news of a potential deal. Representatives for OfficeMax were not immediately available for comment. The news was first reported by the Wall Street Journal.

Neuberger Berman LLC, one of OfficeMax's top investors and which has pressured the company to do more for shareholders, said it would support a merger with Office Depot Inc ODP.N depending on deal terms.

Benjamin Nahum, a portfolio manager at the investment firm, told Reuters in an interview on Monday that his preference would be for OfficeMax to declare a special dividend before merging with Office Depot.   Continued...

 
The Office Max store is seen in Glendale, Arizona October 28, 2009. REUTERS/Joshua Lott