Merger of Office Depot Inc (ODP) Supply Retailers? – OfficeMax Inc (OMX)

In late February, U.S. office-supply rivals OfficeMax (NYSE:OMX)  and Office Depot Inc (NYSE:ODP) made the exciting but largely expected announcement that they were in advanced talks to execute a so-called “merger of equals.” Their combination would create a company with annual revenues of around $18 billion and an employee count of nearly 60,000. The announcement comes after a difficult year for both companies. Facing significant declines in revenues and earnings as well as uncertain future prospects in an increasingly competitive office-supply space, Office Max and Office Depot appear to have had little choice but to combine.

It is important to note that the combined company would still be smaller than dominant U.S. office-supply outfit Staples, Inc. (NASDAQ:SPLS) . Staples has a market cap of $9 billion and sales of $24 billion. The market cap of the combined company would be about $2 billion. However, this fact should not stop interested investors from taking a closer look at this deal. If nothing arises to delay or scuttle the proposed all-stock combination, it could close by the end of the third quarter of 2013.

About Office Max and Office Depot

Naperville, Illinois-based Office Max operates nearly 1,000 retail office-supply stores in the United States, Caribbean and Mexico. The company sells a wide range of disposable office supplies like paper goods, pens, pencils, staplers, stationery and binders as well as more durable goods like filing cabinets, furniture, technology hardware and printing supplies. Many of its outlets offer full-service printing centers as well as pay-per-minute computer terminals. OfficeMax (NYSE:OMX) distributes a catalog to its business clients and maintains a network of salespeople to execute direct-sales orders for larger customers. The company employs about 19,000 people and earned $414.7 million on gross 2012 revenues of about $6.9 billion.

Boca Raton, Florida-based Office Depot operates in many of the same business areas as its merger partner. In addition to the enterprises and product offerings described above, Office Depot Inc (NYSE:ODP) also maintains a sizable food-and-beverage division that provides its business-to-business clients with water coolers, bulk coffee, snacks and other wholesale refreshments for break rooms, lobbies, waiting rooms and other business-related gathering spaces. The company runs nearly 2,000 outlets in North America and the Caribbean. It also maintains supply contracts and sells branded products to office-supply stores in Asia, the Middle East and Latin America.