OfficeMax Incorporated (NYSE:OMX) and Office Depot, Inc.
(NYSE:ODP) today announced the signing of a definitive merger
agreement under which the companies would combine in an all-stock
merger of equals transaction intended to qualify as a tax-free
reorganization. The transaction, which was unanimously approved by
the Board of Directors of both companies, will create a stronger,
more efficient global provider better able to compete in the
rapidly changing office solutions industry. Customers will benefit
from enhanced offerings across multiple distribution channels and
geographies. The combined company, which would have had pro forma
combined revenue for the 12 months ended December 29, 2012 of
approximately $18 billion, will also have significantly improved
financial strength and flexibility, with the ability to deliver
long-term operating performance and improvements through its
increased scale and significant synergy opportunities.
Under the terms of the agreement, OfficeMax stockholders will
receive 2.69 Office Depot common shares for each share of OfficeMax
common stock.
“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,” said Neil
Austrian, Chairman and Chief Executive Officer of Office Depot.
“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.”
“We are excited to bring together two companies intent on
accelerating innovation for our customers and better
differentiating us for success in a dynamic and highly competitive
global industry,” said Ravi Saligram, President and CEO of
OfficeMax. “We are confident that there will be exciting new
opportunities for employees as part of a truly global business.
Together, we will have the opportunity to build on our strong
digital platforms and to expand our multichannel capabilities to
better serve our customers and to compete more effectively.
Importantly, this merger of equals transaction will provide
stockholders of both companies with a compelling opportunity to
participate in the long-term upside potential of the combined
company.”
Companies Expect Strategic Combination
To Create Long-Term Stockholder Value
Key strategic benefits of the transaction include:
- Merger of Equals Structure:
OfficeMax and Office Depot will have equal representation and
governance rights on the combined company’s Board of Directors and
equal input on key decisions. With an all-stock merger, OfficeMax
and Office Depot stockholders will benefit proportionately from the
synergies achieved as a combined company.
- Enhanced Financial Performance:
The combined company is positioned to deliver long-term operating
improvement, with greater potential for earnings expansion and
improved cash flow generation.
- Significant Synergy
Opportunities: The merger is expected to deliver $400-$600
million in annual cost synergies by the third year following the
transaction’s close by leveraging both operating and G&A
efficiencies.
- Financial Strength and
Flexibility: On a pro forma basis as of December 29, 2012, the
combined company would have had more than $1 billion in cash on
hand and more than $1 billion available through revolving credit
facilities, giving it the flexibility to invest in both its current
business and future growth opportunities.
- Increased Scale and
Competitiveness: The combined company will be well positioned
to optimize its shared multichannel sales platform and distribution
network, primarily in North America. Together, the companies will
provide a wide array of services and solutions that enable
customers to work more efficiently and productively. By
implementing best practices in sales, operations and management,
the combined company is expected to be better able to compete with
the many online retailers, warehouse clubs and other traditional
retailers that are placing a greater emphasis on office product
sales.
- Broader Global Footprint: The
merger will combine the two companies’ complementary international
businesses, with minimal overlap, strengthening the combined
company’s ability to serve customers around the world.
- Improved Customer Experience to
Build Brand Loyalty: Consumers and business-to-business
customers are increasingly demanding a seamless omnichannel
experience across retail stores, direct sales, telesales and
digital environments. By integrating these touchpoints effectively,
the combined company expects to build lasting brand loyalty.
- Accelerated Innovation: Both
companies anticipate sharing customer insights and learnings from
innovative pilot programs underway to better identify and fulfill
evolving customer needs.
Transaction Details
Following the closing, the combined company’s newly constituted
Board of Directors will include equal representation and governance
rights from each of the two companies. The parties have also agreed
to form a selection committee made up of an equal number of
independent Board members from each company that will oversee the
search process for naming the CEO for the combined company. Both
incumbent CEOs, as well as external candidates, will be considered
in the search process. Neil Austrian, the Chairman and CEO of
Office Depot, and Ravi Saligram, the President and CEO of OfficeMax
will remain in their current positions through the completion of
the search process.
The combined company’s management team is expected to draw upon
the experienced group of leaders from both companies. The combined
company’s name, marketing brands and corporate headquarters
location are expected to be determined following the appointment of
the CEO for the combined company.
The transaction is expected to close by the end of calendar year
2013, subject to stockholder approval from both companies, the
receipt of regulatory approvals and other customary closing
conditions.
Under the merger agreement, OfficeMax will have the ability to
declare and pay to its common stockholders aggregate cash dividends
of up to $131 million ($1.50 per common share) before the closing
of the transaction. Payment of dividends would not affect the
exchange ratio in the transaction.
In connection with the transaction, BC Partners, Inc. and its
affiliates, which hold preferred stock representing approximately
22 percent of Office Depot on an as-converted basis, have agreed to
vote in favor of the merger. In addition, BC Partners has agreed
that as of the closing, its remaining equity stake will consist of
common shares representing an amount no more than 5 percent of the
voting capital stock of the combined company as a result of the
combination of the redemption of preferred shares, conversion to
common shares and open market sales of such common shares and
repurchases by Office Depot. Following the closing, BC Partners
will have no Board designees or other contractual governance rights
related to the combined company.
J. P. Morgan Securities LLC served as exclusive financial
advisor to OfficeMax, and provided a fairness opinion to the Board
of OfficeMax, and Skadden, Arps, Slate, Meagher & Flom LLP and
Dechert LLP acted as legal counsel to OfficeMax.
Peter J. Solomon Company, L.P. and Morgan Stanley & Co. LLC
acted as financial advisors and provided fairness opinions to the
Board of Office Depot, and Simpson Thacher & Bartlett LLP acted
as legal counsel to Office Depot. Kirkland & Ellis acted as
legal counsel to the Board of Office Depot.
In connection with the transaction, Perella Weinberg Partners
acted as financial advisors to the Transaction Committee of
Office Depot's Board of Directors and Kirkland & Ellis LLP
served as the Committee's legal advisor.
Conference Call and
Webcast
OfficeMax and Office Depot will host a joint webcast today at
11:00 a.m. Eastern Time (10:00 a.m. Central Time) to discuss the
proposed merger. Participants will include Ravi Saligram, President
and CEO, OfficeMax; Bruce Besanko, EVP, Chief Financial Officer and
Chief Administrative Officer, OfficeMax; Neil Austrian, Chairman
and CEO, Office Depot; and Mike Newman, EVP and Chief Financial
Officer, Office Depot.
The live audio webcast of the conference call, as well as a
related slide presentation, can be accessed at either the
“Investors” section of OfficeMax’s website at
www.investor.officemax.com or the “Investors” section of Office
Depot’s website at www.officedepot.com. The webcast and a podcast
will be archived and available online on each company’s website for
at least 30 days following the call.
Fourth Quarter and Full Year 2012
Financial Results
Office Depot and OfficeMax will each announce results for their
fourth quarter and full year 2012 this morning before the market
opens. This content can be accessed, respectively, at the
“Investors” section of Office Depot’s website at officedepot.com
and on the “Quarterly Earnings” page located within the “Investors”
section of OfficeMax’s website at investor.officemax.com.
NO OFFER OR SOLICITATION
This communication is not intended to and does not constitute an
offer to sell or the solicitation of an offer to subscribe for or
buy or an invitation to purchase or subscribe for any securities or
the solicitation of any vote or approval in any jurisdiction in
connection with the transaction or otherwise, nor shall there be
any sale, issuance or transfer of securities in any jurisdiction in
contravention of applicable law. No offer of securities shall be
made except by means of a prospectus meeting the requirements of
Section 10 of the Securities Act of 1933, as amended.
IMPORTANT ADDITIONAL INFORMATION WILL
BE FILED WITH THE SEC
Office Depot will file with the SEC a registration statement on
Form S-4 that will include the Joint Proxy Statement of Office
Depot and OfficeMax that also constitutes a prospectus of Office
Depot. Office Depot and OfficeMax plan to mail the Joint Proxy
Statement/Prospectus to their respective shareholders in connection
with the transaction. INVESTORS AND SHAREHOLDERS ARE URGED TO READ
THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS
FILED OR TO BE FILED WITH THE SEC CAREFULLY WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
OFFICE DEPOT, OFFICEMAX, THE TRANSACTION AND RELATED MATTERS.
Investors and shareholders will be able to obtain free copies of
the Joint Proxy Statement/Prospectus and other documents filed with
the SEC by Office Depot and OfficeMax through the website
maintained by the SEC at www.sec.gov. In addition, investors and
shareholders will be able to obtain free copies of the Joint Proxy
Statement/Prospectus and other documents filed by Office Depot with
the SEC by contacting Office Depot Investor Relations at 6600 North
Military Trail, Boca Raton, FL 33496 or by calling 561-438-3657,
and will be able to obtain free copies of the Joint Proxy
Statement/Prospectus and other documents filed by OfficeMax by
contacting OfficeMax Investor Relations at 263 Shuman Blvd.,
Naperville, Illinois, 60563 or by calling 630-864-6800.
PARTICIPANTS IN THE
SOLICITATION
Office Depot and OfficeMax and their respective directors and
executive officers may be deemed to be participants in the
solicitation of proxies from the respective shareholders of Office
Depot and OfficeMax in respect of the transaction described the
Joint Proxy Statement/Prospectus. Information regarding the persons
who may, under the rules of the SEC, be deemed participants in the
solicitation of the respective shareholders of Office Depot and
OfficeMax in connection with the proposed transaction, including a
description of their direct or indirect interests, by security
holdings or otherwise, will be set forth in the Joint Proxy
Statement/Prospectus when it is filed with the SEC. Information
regarding Office Depot’s directors and executive officers is
contained in Office Depot’s Annual Report on Form 10-K for the year
ended December 29, 2012 and its Proxy Statement on Schedule 14A,
dated March 15, 2012, which are filed with the SEC. Information
regarding OfficeMax’s directors and executive officers is contained
in OfficeMax’s Annual Report on Form 10-K for the year ended
December 31, 2011 and its Proxy Statement on Schedule 14A, dated
March 20, 2012, which are filed with the SEC.
OFFICE DEPOT SAFE HARBOR
STATEMENT
This press release may contain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
concerning Office Depot, the merger and other transactions
contemplated by the merger agreement, Office Depot’s long-term
credit rating and its revenues and operating earnings. These
statements or disclosures may discuss goals, intentions and
expectations as to future trends, plans, events, results of
operations or financial condition, or state other information
relating to Office Depot, based on current beliefs of management as
well as assumptions made by, and information currently available
to, management. Forward-looking statements generally will be
accompanied by words such as “anticipate,” “believe,” “plan,”
“could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,”
“may,” “possible,” “potential,” “predict,” “project” or other
similar words, phrases or expressions. These forward-looking
statements are subject to various risks and uncertainties, many of
which are outside of Office Depot’s control. Therefore, investors
and shareholders should not place undue reliance on such
statements. Factors that could cause actual results to differ
materially from those in the forward-looking statements include
adverse regulatory decisions; failure to satisfy other closing
conditions with respect to the merger; the risks that the new
businesses will not be integrated successfully or that Office Depot
will not realize estimated cost savings and synergies; Office
Depot’s ability to maintain its current long-term credit rating;
unanticipated changes in the markets for its business segments;
unanticipated downturns in business relationships with customers or
their purchases from Office Depot; competitive pressures on Office
Depot’s sales and pricing; increases in the cost of material,
energy and other production costs, or unexpected costs that cannot
be recouped in product pricing; the introduction of competing
technologies; unexpected technical or marketing difficulties;
unexpected claims, charges, litigation or dispute resolutions; new
laws and governmental regulations. The foregoing list of factors is
not exhaustive. Investors and shareholders should carefully
consider the foregoing factors and the other risks and
uncertainties that affect Office Depot’s business described in its
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and other documents filed from time to time
with the SEC. Office Depot does not assume any obligation to update
these forward-looking statements.
OFFICEMAX SAFE HARBOR
STATEMENT
Certain statements made in this press release and other written
or oral statements made by or on behalf of OfficeMax constitute
"forward-looking statements" within the meaning of the federal
securities laws, including statements regarding OfficeMax's future
performance, as well as management's expectations, beliefs,
intentions, plans, estimates or projections relating to the future.
OfficeMax cannot guarantee that the macroeconomy will perform
within the assumptions underlying its projected outlook; that its
initiatives will be successfully executed and produce the results
underlying its expectations, due to the uncertainties inherent in
new initiatives, including customer acceptance, unexpected expenses
or challenges, or slower-than-expected results from initiatives; or
that its actual results will be consistent with the forward-looking
statements and you should not place undue reliance on them. In
addition, forward-looking statements could be affected by the
following additional factors, among others, related to the business
combination: the occurrence of any event, change or other
circumstances that could give rise to the termination of the merger
agreement or the failure to satisfy closing conditions; the ability
to obtain regulatory approvals or third-party approvals for the
transaction and the timing and conditions for such approvals; the
ability to obtain approval of the merger by the stockholders of
OfficeMax and Office Depot; the risk that the synergies from the
transaction may not be realized or may take longer to realize than
expected; disruption from the transaction making it more difficult
to maintain relationships with customers, employees or suppliers;
the ability to successfully integrate the businesses, unexpected
costs or unexpected liabilities that may arise from the
transaction, whether or not consummated; the inability to retain
key personnel; future regulatory or legislative actions that could
adversely affect OfficeMax and Office Depot; and business plans of
the customers and suppliers of OfficeMax and Office Depot. The
forward-looking statements made herein are based on current
expectations and speak only as of the date they are made. OfficeMax
undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of future events,
new information or otherwise. Important factors regarding OfficeMax
that may cause results to differ from expectations are included in
OfficeMax's Annual Report on Form 10-K for the year ended December
31, 2011, under 1A "Risk Factors", and in OfficeMax's other filings
with the SEC.
About OfficeMax
OfficeMax Incorporated (NYSE: OMX) is a leader in integrating
products, solutions and services for the workplace, whether for
business or at home. The OfficeMax mission is simple: We provide
workplace innovation that enables our customers to work better. The
company provides office supplies and paper, in-store print and
document services through OfficeMax ImPress®, technology products
and solutions, and furniture to businesses and consumers. OfficeMax
customers are served by approximately 29,000 associates through
e-commerce, more than 900 stores, direct sales and catalogs.
OfficeMax has been named one of the 2012 World’s Most Ethical
Companies, and is the only company in the office supply industry to
receive Ethics Inside® Certification by the Ethisphere Institute.
To find the nearest OfficeMax, call 1-877-OFFICEMAX. For more
information, visit www.officemax.com.
About Office Depot
Office Depot provides office supplies and services through 1,629
worldwide retail stores, a field sales force, top-rated catalogs
and global e-commerce operations. Office Depot has annual sales of
approximately $10.7 billion, employs about 38,000 associates and
serves customers in 59 countries around the world.
Office Depot’s common stock is listed on the New York Stock
Exchange under the symbol ODP. Additional press information can be
found at: http://mediarelations.officedepot.com and
http://socialpress.officedepot.com/.
All trademarks, service marks and trade names of Office Depot
Incorporated and OfficeMax Incorporated used herein are trademarks
or registered trademarks of Office Depot Incorporated and OfficeMax
Incorporated, respectively. Any other product or company names
mentioned herein are the trademarks of their respective owners.
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