BOCA RATON, FL-A day after word got out that the two companies were in advanced talks on a merger, Office Depot Inc., based here, and Naperville, IL-based OfficeMax made it official. In a joint statement, the two office products retailers said Wednesday morning that they’d signed a definitive agreement under which the companies would combine in an all-stock merger of equals.
The agreement calls for OfficeMax shareholders to receive 2.69 shares of Office Depot stock for every OfficeMax share they own, a deal valued at about $1.2 billion. The combined company would have had pro forma revenues of $18 billion for the 12 months that ended Dec. 31, 2012, compared to more than $24 billion for Staples, the two chains’ arch-rival. The merger is expected to deliver between $400 million and $600 million in annual cost synergies by the third year following the transaction’s close, according to the release.
“In the past decade, with the growth of the Internet, our industry has changed dramatically,” Neil Austrian, chairman and CEO of Office Depot, says in a statement. “Combining our two companies will enhance our ability to serve customers around the world, offer new opportunities for our employees, make us a more attractive partner to our vendors and increase stockholder value.”
Both Austrian and his counterpart at OfficeMax, Ravi Saligram, will remain in their current CEO positions while a search committee mulls over candidates to lead the combined company. The merger is expected to close by year’s end, the release states.
Bloomberg quoted analyst Gary Balter of Credit Suisse as saying the merger could lead to Office Depot and OfficeMax closing or selling as many as 600 locations here and overseas. The two chains at present number about 2,600 stores in total, about 300 more than Staples’ worldwide count.
At least one landlord of the two chains welcomes the opportunity such closings could represent. “Over the past three years we have leased over 34 million square feet across our portfolio while simultaneously increasing rental rates and improving the credit quality of cash flow,” Paul Freddo, senior EVP of leasing and development for Beachwood, OH-based DDR, says in a release. “With our continued increase in portfolio leased rate, we are excited about the opportunity presented by the Office Depot and OfficeMax merger, and we will maintain a close dialogue with both retailers to assist them in their transition and pursue opportunities to recapture valuable space.” DDR owns 50 Office Depot stores and 15 OfficeMax locations, with a combined selling space of about 1.6 million square feet.