Join        Login             Stock Quote

Office Depot (ODP) To Buy Officemax (OMX) In $1.17B Stock Deal

 February 20, 2013 09:36 AM

(By Balaseshan) Office Depot Inc. (NYSE: ODP) has agreed to buy smaller rival OfficeMax Inc. (NYSE: OMX) for $1.17 billion in stock as both the companies face pressure to increase profitability.

Office Depot will issue 2.69 new shares of common stock for each outstanding share of OfficeMax common stock.

The combination is expected to spur a rationalization of excessive office products retailing real estate and render the sector more capable of managing through a challenged product cycle, istockanalyst had noted.

[Related -Level Watching and Swing Trade Planning for Amazon (AMZN)]

The deal, which would merge the number two and three players in the industry, could create an effective and efficient competitor to new entrants such as Amazon.com Inc. (NASDAQ: AMZN) and heavyweight Staples Inc. (NASDAQ: SPLS) by cutting costs via closing overlapping stores and workforce.

Starboard Value, which owns about 15 percent stake in Office Depot, has been pressuring to increase profitability and cut costs leading the company to adopt a 'poison pill' in the form of a shareholder rights plan to defend itself against hostile takeover.

[Related -Netflix, Inc. (NASDAQ:NFLX): Can Netflix Trump Amazon.com, Inc. With New Plans?]

Boca Raton, Florida-based, Office Depot operates nearly 1,700 global stores, are expected to generate 2012 sales of about $10.88 billion, while Naperville, Illinois-based OfficeMax operates about 900 stores in the U.S. and Mexico, annual sales are estimated at $6.97 billion. Analysts reportedly expect the deal to generate cost synergies in a range of $400 million to $700 million.

The combined company would have had pro forma combined revenue of roughly $18 billion for the year ended December 2012. The companies expect the merger to deliver $400 to $600 million in annual cost synergies by the third year following the close of the deal.

The merger stands a better shot at regulatory approval than the 1997 bid by Staples to purchase Office Depot, the Forbes reported, quoting analysts.

"We assume that any deal would be structured as primarily a merger of equals with OMX more of the acquiree. At this juncture, we have yet to determine a potential deal value," Oppenheimer analyst Brian Nagel wrote ahead of the merger announcement.

The deal is expected to close by the end of calendar year 2013.

ODP shares jumped 8.57 percent to $5.45, while OMX shares rose 6.08 percent to $13.79 in early Wednesday trading.

iOnTheMarket Premium


Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageUS REITs Edged Higher Last Week As Emerging Markets Slumped

Real estate investment trusts (REITs) in the US took the lead in last week’s shortened holiday trading week read on...

article imageA Contrarian Perspective On The Short EuroTtrade

As the euro continues to drift lower, it has become the accepted wisdom that we are headed for parity with read on...

article imageEmerging-Markets Stocks Took The Lead Last Week

Emerging-markets equities enjoyed a solid rise last week among the major asset classes, based on a set of read on...

article imageDoes Your Latest Investment Pass This Test?

On Wednesday, I sounded the alarm about the problems looming for some consumer staples stocks. In short, read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.