Staples Inc. and Office Depot Inc. are engaging in “advanced talks to combine,” the Wall Street Journal reported, according to sources close to the matter. If the merger moves forward, it would be a major step in consolidating the office supply retail market. The merger was being encouraged by activist investor Starboard Value LP.
No details regarding the structure or value of the proposal were available, and there is no guarantee that a deal will be reached, however.
Staples currently has a market value of $11 billion and Office Depot of $4.1 billion, according to CNBC. The Boston Globe reported that Activist investors have been increasing their holdings of the retailers in recent months, pushing those companies’ stocks higher. Since the end of October, shares of Staples have risen 35 percent, while Office Depot’s have risen 46 percent.
Previous attempts to join the two retailers were thwarted in 1997, when Staples was prevented from purchasing Office Depot by antitrust regulators.
However, in 2013, the FTC approve the $976 million acquisition of OfficeMax by Office Depot, without the need to close stores, citing increased competition in the office supply industry. "The current competitive dynamics are very different," the Federal Trade Commission wrote in that review. "The Commission’s investigation shows that today’s market for the sale of consumable office supplies is broader" than it was in 1997.
The Office Depot – Staples merger would shake up the office supply retail market, and would ultimately lead to greater savings and would help stave off the growing competition from online retailers and big-box chains that offer the same supplies at lower prices. Together, the two companies have roughly 4,000 stores and annual sales of more than $35 billion.
