Office Depot in $976 million deal to buy rival OfficeMax

Wed Feb 20, 2013 4:31pm EST
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By Phil Wahba

(Reuters) - Office Depot Inc will acquire smaller rival OfficeMax Inc in a $976 million all-stock deal, the companies said on Wednesday, confirming an agreement inadvertently announced earlier in the day, before it was completed.

The combined entity's name, headquarters and CEO are all undetermined, an unusual level of major decisions yet to be made that points to the integration challenge the companies face.

"I have seldom seen a situation where they can't decide on the name, the CEO or the corporate headquarters. Normally that's what you work out before you announce a deal," said Tom Stemberg, managing general partner of the Highland Consumer Fund and founder of office supply chain Staples.

Office Depot shares plunged 17 percent, dragging down the value of the deal. Even with a parallel 7 percent decline in OfficeMax's shares, that stock still closed well above the per-share value implied by the offer.

A source familiar with the situation said the terms of the deal were not yet finalized when the news first broke around 7:30 a.m. EST (1230 GMT) on Office Depot's website in an earnings release that contained certain merger details. Confirmation only came about two hours later.

In a presentation to analysts, Office Depot Chief Executive Officer Neil Austrian said the company's webcast provider inadvertently issued the press release "way ahead" of schedule. Thomson Reuters acknowledged that one of its units was responsible for the premature release.

"We regret this error and are taking all steps necessary to enhance our processes and controls to ensure this does not happen again, as serving our valued customers remains our highest priority," Thomson Reuters said in a statement.

Thomson Reuters is selling its investor relations and services businesses, the unit that was responsible for issuing the Office Depot release, to Nasdaq OMX Group Inc for $390 million. The deal is expected to close during the first half of this year.   Continued...

An Office Depot store is pictured in Encinitas, California, February 19, 2013. REUTERS/Mike Blake