Office Depot (ODP) in Talks to Merge With Staples



Shares of Office Depot Inc. (ODP) were up +1.17 or +15.33 percent to $8.80 in Tuesday's premarket after news that the company was in advanced talks to combine with Staples Inc. (SPLS) While no price has been mentioned and no guarantee that a merger would occur, pressure from an activist investor has made the transaction more likely.

Office Depot stock closed at $7.63 per share, up +0.03 or +0.30 percent in Monday's regular trading session.

Founded in 1986, Boca Raton, Florida based Office Depot Inc. is an international office supply retailer with over 2,200 retail stores in 59 countries. In addition to traditional retail outlets, the company also operates a business to business operation and e-commerce websites. Office Depot merged with OfficeMax in an all-stock deal which finalized in November of 2013. The combined company has annual sales of about $17 billion and employs more than 66,000 people worldwide.

Framingham, Massachusetts based Staples Inc. was also founded in 1986 and is another large office supply retail chain with more than 3,500 stores in 26 countries. The company sells office supplies, office equipment, furniture, business services such as IT consulting and office technology, as well as promotional products for businesses.

The merger talks are a direct result of the efforts of an activist investor, Starboard Value LP, a New York City based hedge fund. Starboard already owned a 5.1 percent stake in Staples when it increased its stake in Office Depot to almost 10 percent in December of last year. The hedge fund now owns a 6.1 stake in Staples.

On January 20th, Starboard's founder and Chief Executive Officer, Jeffrey Smith wrote a letter to Staples' Chief Executive, Ronald Sargent stating that, This merger makes too much sense to ignore, the letter continued, It is time for you to take action engage advisers and work expeditiously with Office Depot to consummate a transaction. and that, If it becomes clear to us that you have no intention of seriously pursuing this unique and highly attractive opportunity, it would be a clear sign that significant leadership change is needed at Staples.

Starboard pushed for the 2013 deal between Office Depot and OfficeMax, this resulted in the successful merger of the two companies. The $976 million transaction was approved by the FTC without either company having to sell any stores, despite the transaction having anti-trust issues. Staples tried to take over Office Depot in 1997, but was stopped by regulators.

As of this writing, neither company responded to requests for comments on the news, but both stocks are trading higher in this morning's premarket. Staples stock is up over +13 percent, while Office Depot is up more than 15 percent.

While the transaction has not yet been confirmed, and no price for a merger has been determined, the market appears to welcome the news. Whether there will be any anti-trust issues for the possible merger is still uncertain.

Other News About ODP

Tarlton snags Office Depot distribution center in Menlo Park for $36M
Real estate company buys Office Depot's 217,000 square foot distribution center in Silicon Valley.

Office Depot, Inc. to Announce Fourth Quarter and Full Year 2014 Results Tuesday, February 24, 2015
The company will hold a conference call after the earnings release at 9AM Eastern Time.

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LinkedIn stock could rise 25% this year
Goldman Sachs adds the stock to its Conviction Buy list.

UPS profit hit by high costs during holiday season
Company reports a 2 percent decline in profits.

Published on Feb 3, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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