FRAMINGHAM, MA—Office-supply retailing giants Staples Inc. and Office Depot Inc. said Wednesday they've agreed to merge in a cash-and-stock deal valued at $6.3 billion. The combined company will have pro forma annual sales of about $39 billion; the deal is expected to close by year's end.

“This is a transformational acquisition which enables Staples to provide more value to customers, and more effectively compete in a rapidly evolving competitive environment,” says Ron Sargent, SPLS' chairman and CEO. “We expect to recognize at least $1 billion of synergies as we aggressively reduce global expenses and optimize our retail footprint. These savings will dramatically accelerate our strategic reinvention which is focused on driving growth in our delivery businesses and in categories beyond office supplies.”

The two companies, which previously sought to combine 18 years ago but were thwarted by antitrust regulators, began discussing a possible merger last September. However, Bloomberg reported Wednesday that the deal followed pressure from activist investor Starboard Value, including a letter made public last month, which said that a merger between SPLS and ODP “would create an industry-leading office supply retailer that could more effectively compete against larger retailers and online competitors.”

A SPLS-ODP combination needs to clear regulatory hurdles anew and win approval from ODP's shareholders. In an investor presentation Wednesday, SPLS said it would call off the deal if antitrust authorities required to divest assets that generated more than $1.25 billion of ODP's 2014 US revenues. If that occurred, SPLS would pay a $250-million breakup fee to ODP.

However, the Federal Trade Commission okayed the 2013 merger of ODP and OfficeMax without requiring any divestitures. In the case of a merger between SPLS and ODP, the FTC is likely to focus on “whether there is anything special about competition from office-supply superstores, such that reducing the number of competitors in that channel to one will result in higher prices to at least some consumers for at least some prices,” Amanda Wait, a partner at Washington-based Hunton & Williams LLP, told Bloomberg earlier this week.

Assuming the planned merger goes through, SPLS will add two directors from ODP to its board, thus bringing the board's roster to 13 directors. SPLS' corporate headquarters will remain in Framingham, MA and Sargent will continue to serve as chairman and CEO. The combined company will maintain a presence in Boca Raton, FL, where ODP is headquartered.

In connection with the acquisition, SPLS has obtained financing commitments from Barclays and BofA Merrill Lynch for a $3-billion ABL credit facility and a $2.75-billion, six-year term loan. The closing of the transaction will not be subject to financing conditions.

Barclays is acting as exclusive financial advisor to SPLS; Wilmer Cutler Pickering Hale and Dorr LLP and Weil, Gotshal & Manges LLP are acting as its legal advisors. Peter J. Solomon Co. is acting as exclusive financial advisor to ODP and Simpson Thacher & Bartlett LLP is providing it with legal counsel.