The Wall Street Journal reported Monday that the nation’s second and third largest office supply companies, Office Depot (ODP) and Office Max (OMX) respectively, are nearing the final stages of a merger deal. The two companies combined would still trail behind Staples (SPLS) by a considerable margin based on market cap.
With an announcement possible as early as this week, a deal is still not yet finalized and few details are known aside from the fact that the move would take place as a stock-for-stock transaction. Both companies have yet to comment on the news, but could see considerable cost-cutting benefits as a result of the merger. Indeed, there are many instances across the country where an Office Max store can be found within a short distance of an Office Depot. In many instances the two can be found within the same shopping center. A union between the outlets could provide the possibility of merging locations and consolidating sales.
Taken together, the two companies employ about 68,000 people, and enjoy annual sales of about $18.5 billion. These combined figures could conceivably become more profitable were they to be reoriented to one single ownership and business model.
A merger could also help both offset the pressure they are currently feeling from discount chain competitors like Wal-Mart (WMT) and Costco (COST), and the increasingly dominant online-retailer Amazon (AMZN), and is yet another indicator that competition from online-shopping is complicating business for a variety of specific retail outlets.
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