--Press release on Office Depot website announces OfficeMax
merger
--Announcement accompanied by week-early earnings report
--Release later removed from website
(Updates with details about Office Depot's press release in
first four paragraphs.)
By Joan E. Solsman, Melodie Warner and Saabira Chaudhuri
Office Depot Inc. (ODP) said in a press release Wednesday on its
website that it had agreed to merge with OfficeMax Inc. (OMX) in an
all-stock deal that values the rival office-supplies retailer at
roughly $1.19 billion.
However, about an hour later, that press release--which also
included Office Depot's earnings, about a week earlier than
expected--was removed from the company's website. The release
didn't appear anywhere else, such as on those services that
distribute press releases to media organizations, and neither
company has filed anything yet to the Securities and Exchange
Commission.
Office Depot and OfficeMax representatives didn't immediately
respond to messages for comment.
The release, dated Wednesday, said Office Depot and OfficeMax
reached a definitive agreement on Tuesday to merge. According to
the release, Office Depot said it would issue 2.69 new
shares--valuing OfficeMax at $13.50 a share based on Tuesday's
close--for each OfficeMax share outstanding. The stock-swap value
is a 3.8% premium to Tuesday's close of $13.
Shares of Office Depot were recently trading 5.6% higher at
$5.30 premarket, while OfficeMax shares jumped 4.4% to $13.57. That
follows 9.4% and 21% jumps in their shares, respectively,
Tuesday.
The combined company's board will include an equal number of
directors designated by Office Depot and OfficeMax.
The Wall Street Journal reported earlier this week that
OfficeMax and Office Depot were in advanced talks to merge as the
retailers try to fight off tougher competition from rivals like
Staples Inc. (SPLS) and Amazon.com Inc. (AMZN).
The deal will combine two companies that have been hammered in
recent years by weak economic conditions, falling sales and rising
online competition.
Still, the two chains have a substantial retail presence. Office
Depot, based in Boca Raton, Fla., has about 1,675 stores
world-wide, annual sales of some $11.5 billion and about 39,000
employees. OfficeMax, based in Naperville, Ill., has about 900
stores in the U.S. and Mexico, roughly $7 billion in annual sales
and approximately 29,000 employees.
Office Depot also has been under pressure from activist hedge
fund Starboard Value LP, which disclosed holding a sizable stake in
September and has pushed the company to accelerate cost-cutting and
take other steps to improve profitability. In October, Office Depot
adopted a shareholder-rights plan, or "poison pill," that is
designed to deter hostile takeovers.
Separately Wednesday, Office Depot also reported it swung to a
fourth-quarter loss as revenue declined, pushing results below
Street estimates.
For the quarter ended Dec. 29, Office Depot reported a loss of
$7.3 million, or 6 cents a share, compared with a year-earlier
profit of $20.4 million, or 4 cents a share. Stripping out one-time
items, the company reported break-even per-share earnings for the
quarter, versus 3 cents a year earlier.
Revenue fell 12%--or 11% in constant currency--to $2.62
billion.
Analysts polled by Thomson Reuters recently expected per-share
earnings of 4 cents on revenue of $2.76 billion.
Gross margin narrowed to 29.9% from 30.3% a year earlier.
Office Depot's plan to revive includes remodeling to reduce
average store size, eliminating lower-margin products such as
entry-level laptop computers and relying less on sales
promotions.
OfficeMax is scheduled to post its quarterly and annual results
Thursday.
Write to Joan E. Solsman at joan.solsman@dowjones.com and
Melodie Warner at melodie.warner@dowjones.com
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