Investors woke up Wednesday to news that Staples has agreed to purchase Office Depot in a massive $6.3 billion deal, which would include cash and stock. If the merger is approved, it would unite the two largest office supply retailers in the United States.
The proposal, one that will likely be placed under intense anti-trust scrutiny, would see Staples pay Office Depot $7.25 per share in cash and 0.2188 of its shares for every Office Depot share. Based upon the Feb. 2 closing price, Office Depot values its stock at $11 per share.
The deal is expected to be completed by the end of the year. Both companies declined to comment on the reports. One of the lead proponents of the deal was activist investor Starboard Value LP, which urged the two companies to merge.
During the pre-market trading session Wednesday, Office Depot shares were up 19 percent at $9.22, while Staples shares were up 12 percent at $19.19.
“This transaction delivers great value for our shareholders and creates a company ideally positioned to serve our customers and grow over the long term,” said Roland Smith, the chief executive of Office Depot, in a statement. “It is also an endorsement of our many accomplishments and the tremendous success we’ve had integrating Office Depot and OfficeMax over the past year. We look forward to bringing our experience and knowledge to the new organization.”
Similar to many other retailers in North America, office supply retailers haven’t been immune to the widespread dominance of Amazon and Wal-Mart. Indeed, ecommerce and big-box stores have chomped away at the two retailers’ stores.
Last year, Staples announced that it would be shutting down up to 225 of its underperforming stores as part of a cost-cutting initiative. One part of its plan to become more competitive is to have its employees accept packages for the United States Postal Service, but it was quickly denounced by unions.
Also, this isn’t the first time that Office Depot has merged with a company. In 2013, the company acquired OfficeMax for $1.3 billion worth of stock.
