By Chelsey Dulaney
Staples Inc. agreed to buy Office Depot Inc. for $6.3 billion,
taking a major step toward consolidating the retail market for
pens, paper and other office supplies.
Under the deal, Office Depot shareholders will swap each share
for $7.25 in cash and 0.2188 Staples shares. The deal values Office
Depot at $11 a share, a premium of 44% over the closing price of
Office Depot shares as of Feb. 2, when The Wall Street Journal
reported the talks.
Together, the two companies have roughly 4,000 stores and annual
sales of more than $35 billion. A combination of the two likely
would get a close look from antitrust regulators, who in 1997 sued
successfully to block the same proposed merger, bankers and
analysts have said.
But some analysts say the retail landscape has changed
sufficiently since then, citing the rise of online retailers like
Amazon.com Inc. and increased competition from big-box chains like
Wal-Mart Stores Inc. and Target Corp., which all sell office
supplies now, too.
Staples said Wednesday that it has been in talks to buy Office
Depot since September. Staples expects the deal to result in about
$1 billion in synergies by the third full year after closing, which
is expected by the end of the year.
The deal would likely be cheered by activist investor Starboard
Value LP, which owns about 6% of Staples and 10% of Office Depot,
and in January urged the companies to consider a merger. In a
letter to Staples Chief Executive Ronald Sargent, Starboard said
the cost savings from such a combination could more than double the
combined company's operating profit.
Merger talks between Staples and Office Depot highlight the
pressures facing brick-and-mortar retail stores as consumers shift
how and where they shop. Staples' North American same-store sales
haven't risen since 2007, and Office Depot's haven't risen since
2006.
Meanwhile, both companies have been closing U.S. stores and
shifting others to smaller formats, while pushing their online
offerings.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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