Wed February 20, 2013
Office Depot Announces Plans To Merge With OfficeMax
Originally published on Wed February 20, 2013 5:11 pm
MELISSA BLOCK, HOST:
From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block, with this accounting of the rapid pace of deal making in corporate America. This month alone, U.S. Airways and American Airlines merged, Comcast bought up NBC Universal, Warren Buffett teamed up with a Brazilian firm to buy the Heinz Company, and Michael Dell helped take the public company that bears his name private.
More on that in a few minutes. First, to today's deal in the world of office supplies. Office Depot and Office Max are planning to merge. NPR's Yuki Noguchi has more on that.
YUKI NOGUCHI, BYLINE: The two companies would have over 2,500 stores worldwide, nearly 70,000 employees and about $18 billion in sales. Ravi Saligram, the CEO of Office Max, said joining forces was necessary for the two to be on stronger financial and strategic footing.
RAVI SALIGRAM: This combination will create a stronger, more global, efficient competitor able to meet the growing challenges of a rapidly changing industry.
NOGUCHI: Both companies' sales have been declining and they say consolidating sales, distribution, advertising and employees will save 400 to $600 million annually. But regulatory approval remains an open question. Office Depot once tried to merge with another firm, Staples, back in 1997. The Federal Trade Commission challenged the deal in court and won.
But as Office Depot CEO Neil Austrian noted in a conference call, the market has changed a great deal since then.
NEIL AUSTRIAN: The Internet changed everything and I think all you had to do in '97 was walk into Wal-Mart and they may have had 100 to 200 square feet of office supplies and today they've got thousands of square feet of office supplies.
NOGUCHI: Online rivals like Amazon have also grabbed substantial marketshare, as has big warehouse stores like Costco. Plus, a merged Office Depot and Office Max would still be smaller than the industry leader, Staples, which is why BB&T Capital Markets managing director Anthony Chukumba says he doesn't think regulators will stop this deal.
ANTHONY CHUKUMBA: I'm not terribly concerned about this deal passing muster with the FTC. While the FTC did strike down the Staples/Office Depot deal in 1997, the competitive landscape has changed dramatically since that time.
NOGUCHI: Chukumba says brick and mortar office supply retailers have a very stable business, from small to large business clients who want one-stop shops that can deliver supplies quickly in a single delivery. Office Depot and Office Max said they will continue to compete as rivals until the deal closes, which they expect to happen by the end of the year.
An executive search firm will name the new head of the company and the new company's name and brand will be determined after the deal closes. Yuki Noguchi, NPR News, Washington. Transcript provided by NPR, Copyright NPR.