Office Depot announced it will merge with Office Max in a $1.17 billion all-stock deal. Rumors of the merger have been leaking on the internet for months and on February 20, 2013, Office Depot finally confirmed that the announcement was released prematurely, but the deal is going to happen.
This merger will combine the smaller rivals to compete with their larger competitor, Staples. They anticipate closing this deal by the end of 2013. They will also be forming a selection committee with an equal number of board members from each company. This committee will oversee the process of searching for the CEO for the merged firm.
According to the Business Journal, Office Max’s Ravi Saligram’s age gives him the leading edge over Office Depot’s Neil Austrian, as CEO of the merged firms. External candidates and both CEOs will be considered in the search process. Until the search is completed, the CEOs will remain in their current positions.
In this deal, for every share of OfficeMax stock, shareholders will be compensated with 2.69 shares of Office Depot stock. What’s left to be determined is whether the company will be headquartered in OfficeMax’s Naperville, Illinois or Office Depot’s Boca Raton, Florida.
Office Depot has been downsizing its larger stores to save money and will close up to 20 stores this year. According to Office Depot’s website, fourth quarter earnings were down substantially from fourth quarter 2011. In 2011, the company profited $12.3 million on $3 billion in sales and it reported a net loss of $17.49 million on sales of $2.6 billion in fourth quarter 2012. Included in the fourth quarter results was approximately $9 million of non-cash asset impairment charges in the North American Retail Division and $12 million of pre-tax charges associated with the company’s restructuring activities.
Austrian said, “In the past decade, with the growth of the internet, our industry has changed dramatically. 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. Office Depot and OfficeMax share a similar vision and culture, and will greatly benefit from drawing on the industry’s most talented people, combining our best practices and realizing significant savings. We are confident that this merger of equals represents a new beginning for our two companies and will allow us to build a more competitive enterprise for the long term.”
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