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Staples to Buy Office Depot in Deal Valued at $6.3 Billion

Image: Staples to Buy Office Depot in Deal Valued at $6.3 Billion
(Mike Blake/Reuters/Landov)

Wednesday, 04 Feb 2015 08:00 AM

Staples Inc. agreed to buy Office Depot Inc. for $11 a share, or an equity value of about $6.3 billion, bowing to pressure from activist investor Starboard Value to pool their resources.

Office Depot shareholders will get $7.25 in cash and 0.2188 of a share in Staples stock at closing, the office-supply retailers said in a statement today. It represents a premium of 44 percent over Office Depot’s closing share price on Feb. 2.

The deal will create a retail chain with more than $35 billion in revenue and thousands of stores, drawing scrutiny from antitrust regulators. The Federal Trade Commission previously approved the merger of Office Depot and OfficeMax, the industry’s second- and third-biggest chains, in 2013. The question now is whether a changing retail landscape -- rife with competition from e-commerce sites -- means there doesn’t need to be more than one major office-supply chain.

“The FTC’s key question likely will be whether there is anything special about competition from office-supply superstores, such that reducing the number of competitors in that channel to one will result in higher prices to at least some consumers for at least some prices,” Amanda Wait, a former FTC lawyer who is now a partner at Washington-based Hunton & Williams LLP, said in an e-mailed statement.

Office Depot soared 22 percent to close at $9.28 on Feb. 3 after reports of the merger talks.

Staples, located in Framingham, Massachusetts, had a market value of $12 billion based on Tuesday’s closing price. Office Depot, based in Boca Raton, Florida, was pegged $5 billion.

Activist Investor

Starboard, an investor with stakes in both retailers, sent a letter to Staples Chief Executive Officer Ronald Sargent last month demanding that his company engage advisers to work on a deal. The combination could deliver more than $2 billion in cost savings and help the retailers compete with larger chains and online offerings, according to Starboard.

At the time, Staples gave a tepid response to Starboard, saying it had already met with the investment firm on several occasions to consider ideas. It didn’t discuss its willingness to make a deal.

Starboard previously pushed for the merger of Office Depot and OfficeMax, and investors have speculated that it could replicate that strategy with Staples. New York-based Starboard has said it owns about 6 percent of Staples and almost 10 percent of Office Depot.


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Staples Inc. agreed to buy Office Depot Inc. for $11 a share, or an equity value of about $6.3 billion, bowing to pressure from activist investor Starboard Value to pool their resources.Office Depot shareholders will get $7.25 in cash and 0.2188 of a share in Staples stock...
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2015-00-04
Wednesday, 04 Feb 2015 08:00 AM
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