February 4, 2015
New York Times reported that according to “people with knowledge of the matter”, Staples and Office Depot are discussing joining forces in a merger that would see Staples acquire Office Depot, with the news following the merging of Office Depot and OfficeMax in 2013.
While it was noted that “talks were continuing and could still fall apart”, the article stated that “a deal could be announced as early as next week”; with activist hedge fund Starboard Value, which owns 10 percent of Office Depot and six percent of Staples, reportedly calling on the companies to merge “to better compete against the likes of Walmart and Amazon.com” as “a combined company would be able to cut costs while having increased size to compete with rivals”.
In a letter to Staples in January, Starboard reportedly stated that the recent strong performance of the company’s stock price meant that “this merger makes too much sense to ignore” and “it’s time for you to take action – engage advisors and work expeditiously with Office Depot to consummate a transaction”. The hedge fund also hinted that it “might wage a proxy fight to unseat Staples’ leadership” should no action be taken.
The two companies had previously tried to join forces in 1997, but it had been blocked by antitrust regulators. The article noted that this time the regulators may try to block the merger as “a combined company would control too much of the market”, although this consolidation may have been offset by the rise of e-commerce companies; with the Federal Trade Commission acknowledging during the Office Depot/OfficeMax merger that the competitive landscape had been altered by the “rise of alternative sources” for office supplies.
Should the deal go ahead, Staples and Office Depot would operate around 4,400 stores, with combined annual sales estimated to reach about $34 billion (€30 billion).
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