[Southsider2k12]

No matter what is said, you can bet that this means one of the stores in Michigan City will be closing, I would guess within the next year for sure.

http://www.businessweek.com/news/2013-02-2...te-with-staples

Office Depot, OfficeMax to Merge to Compete With Staples
By David Welch and Matt Townsend on February 20, 2013

Office Depot Inc. (ODP) agreed to buy OfficeMax Inc. for $1.17 billion in a bid to revive a retailer that has been losing sales to online rivals and Staples Inc. (SPLS), the largest U.S. office-supplies chain.

Office Depot will issue 2.69 new shares for each outstanding OfficeMax common share, according to a statement today on its website. That’s equal to $13.50 a share, based on yesterday’s closing price, a premium of about 26 percent to Feb. 15 before reports the companies were in talks to combine.

The merger will combine companies with revenue (ODP) totaling about $18 billion compared with more than $24 billion in sales last year for Staples. The company may accelerate the closing or selling of hundreds of stores after Starboard Value LP, an activist fund that became Office Depot’s largest shareholder (ODP) in September, pushed for expense reductions.

“Consolidation is needed in an overstored and secularly declining industry,” Greg Melich, an analyst at International Strategy & Investment Group LLC in New York, wrote in a note Feb. 19. “We see two fundamental shifts that continue to hurt demand: digitization of the workplace (that is reducing the demand for traditional office products) and a shift to e- commerce.”

Office Depot, based in Boca Raton, Florida, surged 9.4 percent to $5.02 yesterday after a person familiar with the situation said the companies were in merger talks. Naperville, Illinois-based OfficeMax rose 21 percent to $13.
New Board

The new company’s board will be revamped to include an equal number of directors designated by Office Depot and OfficeMax, the statement said.

Starboard Chief Executive Officer Jeffrey Smith wrote a letter to Office Depot CEO Neil Austrian on Sept. 17 arguing that the retailer’s “poor operating performance” has hurt the stock. Smith, whose firm owns 13 percent of the chain, recommended smaller stores carrying fewer items. It also should cut general expenses and lower advertising costs, he said.

While Starboard would support the idea of a merger, the firm would need to see terms of the deal before approving anything proposed between the two retailers, said a person familiar with that matter.

A combination may generate as much as $580 million in cost savings, Daniel Binder, an analyst for Jefferies & Co. in New York, wrote in a note to clients. Both chains have been closing locations and that trend would accelerate with a merger as about 50 percent of their store territories overlap, he said.

The combined OfficeMax and Office Depot may close or sell as many as 600 locations, giving Staples an opportunity to increase sales in those areas, Gary Balter, an analyst for Credit Suisse Group AG in New York, wrote in a note to clients.

Staples had 2,295 stores worldwide as of Jan. 28, 2012. In statements earlier this month, Office Depot said it had about 1,675 global locations and OfficeMax said it had about 900 stores in the U.S. and Mexico.
‘Makes Sense’

“It makes sense to close a lot of stores and fulfill orders out of facilities that specialize in packing and delivering, using less expensive real estate,” Erik Gordon, a business and law professor at the University of Michigan in Ann Arbor, said in an e-mail Feb. 19. “It’s become a cost-driven, commodity business. Everyone sells Bic pens and Swingline staplers. The competitive advantage is to sell them cheaper and get them delivered quickly.”
Antitrust Questions

The deal may be challenged by the Federal Trade Commission, according to David Balto, an antitrust attorney in Washington who was the FTC’s director of policy for six years ending in 2001. He worked on the FTC’s lawsuit that stopped Staples from acquiring Office Depot in 1997.

Balto said reducing the number of big-box office retailers from three to two may be viewed as anti-competitive, just as it was back then. In addition, the Obama administration has been tough about enforcing antitrust laws, he said.

“They are facing a stiff wind,” Balto said in a phone interview. “You have three players right now and they want to reduce it by one. That rivalry results in better pricing and services for consumers.”

The industry has “dramatically changed” since 1997 with consumers having more choices since the emergence of online competitors such as Amazon.com Inc., Binder said in the same note. It is these competitors and the digitization of the office that can no longer support three national office-supply chains, he said.
‘Natural’ Combination

As small businesses, the main customer of all three chains, shifted to using fewer pens and filing cabinets, the companies have broadened their selection into technology products such as software, tablets and smartphones. The chains have also branched out into offering more services such as copy printing and computer repair.

There has been speculation of a merger between the two smaller office retailers since last year. A combination of Office Depot and OfficeMax would be “natural,” Staples Chairman and CEO Ronald Sargent said last year at a conference. The FTC is more likely to allow such a combination than if Framingham, Massachusetts-based Staples were to buy either company, he said.

To contact the reporters on this story: David Welch in New York at dwelch12@bloomberg.net; Matt Townsend in New York at mtownsend9@bloomberg.net

[JHeath]

This is from a letter I received via email from the folks at Office Max:

February 20, 2013

Dear MaxPerks Customer,

Today, OfficeMax announced plans to join with Office Depot to create a stronger, combined global company with a wide array of services and solutions that enable you, our valued MaxPerks customer, to work more efficiently and productively.

The combined company will build on the best of both organizations to give you even more product choices, advanced technology and printing services, and new innovations to help you work better in business and at home every day. By integrating our network of retail stores, direct sales, telesales and online environments, we'll provide you multiple ways to connect with us.

Over the last six months, OfficeMax has added new technology support, cloud and website services. Recognizing the impact of economic and tax changes to the bottom line, we want to help make every dollar you spend work even harder by providing more everyday MaxPerks and weekly promotion value. We've expanded private brand products that offer strong performance at great value. Our commitment is to continue building this value as we serve you.

We expect the merger transaction to close by the end of calendar year 2013, subject to customary closing conditions. Until then, OfficeMax and Office Depot will remain separate companies, and each company will maintain its current rewards program. I want to assure you that your MaxPerks rewards are secure, and as a MaxPerks customer, you will continue to:

• Earn 5% back when you spend $500 on qualifying purchases including ink, toner, paper and printing services between January 1 and December 31 each year;

• Receive a $2 recycling reward on qualifying ink and toner cartridges, and;

• Earn extra bonus rewards every month on featured items

I invite you to visit www.officemax.com/maxperks for the latest MaxPerks program information. Thank you for your continued loyalty, and we look forward to serving you with the same exceptional service you've come to expect from OfficeMax

Sincerely,

Ravi Saligram
President and CEO

[BeldenStNewbie]

The sign wavers were out in front of the Office Depot store today advertising a Store Closing sale.

[Southsider2k12]

The sign wavers were out in front of the Office Depot store today advertising a Store Closing sale.

Not a big surprise. Sad to see the jobs go though.