OfficeMax and Office Depot announced that they’re going to merge but there are some questions about the deal that need to be answered. According to the agreement between the two companies, Office Depot would issue 2.69 new shares of common stock for every outstanding common share of OfficeMax. Executives from both companies declined to comment on where the resulting company will be based and who will become the CEO or what the position would be called.
Office Depot CEO Neil Austrian and OfficeMax CEO Ravi Saligram showed that they were united during the conference call with analysts last Wednesday. They took turns in explaining the details of the pending merger.
Saligram said that the merger would create a stronger, more efficient company. The announcement of the deal put to rest the speculations of a deal that has been going around for years. Office Depot is the second largest company in the office supplies industry while OfficeMax is in third place.
A merger between OfficeMax and Office Depot made sense for most analysts. Market leader Staples would also benefit from the merger. If the deal is finalized, the merged company must close several stores. Staples will have fewer stores to compete with.
OfficeMax has around 29,000 workers and operates 978 stores. Office Depot has around 39,000 employees and operates 1,675 stores. The two CEOs didn’t state the number of stores that would be closed after the merger. Analysts predicted that around 600 stores would be shut down.
Once the merger is finalized, the resulting company’s board would have equal number of directors picked by OfficeMax and Office Depot. The deal is said to be worth around $976 million. The merged company would have $18 billion in sales and have $400 million to $600 million in savings over three years.
OfficeMax shareholders would own 46 percent of the combined company and Office Depot shareholders would get 54 percent. It is still unclear as to whether the shareholders are satisfied with the merger.