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Jay McIntosh

Office Depot, OfficeMax agree to merge in stock deal valued at $1.17 billion

NAPERVILLE, Ill. — Office Depot and OfficeMax said today they've signed a definitive merger agreement that will create an $18 billion office supply retail giant.

OfficeMax shareholders would receive 2.69 shares in Office Depot in the all-stock transaction, valued at about $1.17 billion, the companies said in a joint press release this morning.

The merger is still subject to a vote by stockholders of both companies and is expected to close by the end of this year, the retailers said. BC Partners and affiliates, which hold preferred stock equal to about a 22% stake in Office Depot, will vote in favor of the deal, officials said.

Office Depot reported 2012 sales of $10.7 billion, down 7% from 2011 - or down 4%, when adjusting for an extra week in the 2011 fiscal year. Office Max had sales of $6.9 billion last year, down about 3% from the previous year.

Office Depot has 1,629 stores worldwide and OfficeMax has "more than 900," the companies said.

The merged company would still be smaller than category leader Staples, whose 2012 sales topped $24 billion.

Office Depot and OfficeMax officials said the merger would create "a stronger, more efficient global provider better able to compete in the rapidly changing office solutions industry."

"In the past decade, with the growth of the Internet, our industry has changed dramatically," said Neil Austrian, chairman and CEO of Office Depot. "Combining our two companies will enhance our ability to serve customers around the world, offer new opportunities for our employees, make us a more attractive partner to our vendors, and increase stockholder value."

Ravi Saligram, president and CEO of OfficeMax, added, "We are excited to bring together two companies intent on accelerating innovation for our customers and better differentiating us for success in a dynamic and highly competitive global industry.... Together, we will have the opportunity to build on our strong digital platforms and to expand our multichannel capabilities to better serve our customers and to compete more effectively. Importantly, this merger of equals transaction will provide stockholders of both companies with a compelling opportunity to participate in the long-term upside potential of the combined company."

In addition to their bricks-and-mortar stores, both companies also have e-commerce, direct sales and catalog operations.

Office Depot has about 38,000 employees and OfficeMax about 29,000, the companies said.

All three office superstore chains sell a substantial amount of furniture, much of its ready-to-assemble.

Furniture/Today ranked Office Depot 23rd among all U.S. furniture and bedding retailers with an estimated $606 million in furniture sales in 2011, the latest year for which data is available. OfficeMax didn't make the Top 25 list that year, but has been on it in the past.
Staples was No. 15 with estimated 2011 furniture sales of $848 million.

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