Office Depot closes deal to buy OfficeMax
By Dhanya Skariachan
NEW YORK (Reuters) - Office Depot Inc ODP.N on Tuesday closed its deal to buy smaller rival OfficeMax Inc OMX.N but both U.S. office retailers reported third-quarter results that missed Wall Street's profit targets, underscoring the challenges the combined company will face.
The retailers also named the two firms' chief executives as co-CEOs of the combined company while the search continues for a permanent replacement.
Last week, the retailers received regulatory approval for their $976 million deal. It aims at cutting costs, consolidating stores, boosting clout with suppliers and improving their chances of fighting market leader Staples Inc (SPLS.O: Quote), as well as online and discount rivals.
Uncertainty around the timing of the Federal Trade Commission approval made it challenging to find a new CEO by the time the deal closed, the committee in charge of the search said. But it expects to complete the process in the "near future."
Janney Capital Markets analyst David Strasser had expected the combined company to name a new CEO today, but did not read too much into the company not doing so.
"These things don't happen based on a schedule of office. They happen based on schedules of the people involved," Strasser said.
Despite the lackluster report cards from the companies due primarily to weak sales, he said the combined entity "is ultimately a better company," citing a stronger balance sheet. The deal is also good for the industry as it will take out excess capacity, Strasser said.
Neil Austrian, chairman and CEO of Office Depot, and Ravi Saligram, president and CEO of OfficeMax, will serve as co-CEOs in the meantime. Continued...