OfficeMax and Office Depot will reportedly merge their brands, but some Twitter reports indicate that news of a sealed deal between the two office supply chains came somewhat prematurely.
OfficeMax and Office Depot both occupy some of the same space in office supply retail, an area that has struggled somewhat in recent years as paper is rapidly replaced with digital communication. But the need for printer stock and pens is always there, and according to the Associated Press, a deal is in the works between the two chains to become one office supply conglomerate:
“Office Depot Inc. said Wednesday it agreed to buy OfficeMax in an all-stock deal that would transform office supply retail sector … Boca Raton, Fla.-based Office Depot Inc. and Naperville, Ill.-based OfficeMax said holders of OfficeMax shares will receive 2.69 shares of Office Depot for every OfficeMax share they own.”
According to the newswire, the reported OfficeMax and Office Depot merger comes as chains in the space also contend with another aspect of the digital era — competition from cut-rate online suppliers as well as big discounters:
“But the rise of Web retailers like Amazon.com and more expansion into office supply categories by discounters like Costco and Wal-Mart has been tough on the sector. In addition, office suppliers were slow to bounce back from the recession, as consumers and small businesses alike cut back on ordering office products.”
Analysts view the OfficeMax Office Depot potential merger to be a positive move in the fraught sector, and S&P analyst Ian Gordon said yesterday:
“We think a potential merger would result in a significant number of store closings, and thus an improvement in the overall economics of the office supply retail business. This area has been under pressure from a weak business spending environment and competition from non-traditional channels like Amazon in our view.”
This morning, the New York Times reported that a press release regarding the OfficeMax Office Depot merger had evaporated from the former’s website, citing ongoing negotiations as a factor in the secrecy. The paper explains:
A press release announcing the merger of the two office supply retailers briefly surfaced Wednesday on Office Depot’s Web site. Since then, the announcement has disappeared.
“The deal negotiations are ongoing, according to two people with knowledge of the matter. As of Wednesday morning, the company’s bankers and lawyers were still attempting to finalize an agreement.”
Ambiguity aside, the rumored OfficeMax Office Depot merger caused both stocks to jump, with the former up seven percent and the later eight at the bell yesterday.