Report: Staples, Office Depot discuss merger

Framingham, Mass. – The office supply retail vertical may be in for more consolidation. According to the Wall Street Journal, Staples Inc. and Office Depot Inc. are in the “advanced stages” of negotiations to combine the two biggest U.S. office supply chains.



Staples is valued at about $11 billion, while Office Depot has a value of about $4 billion. Combined, the companies would have roughly 4,000 stores and $35 billion in annual sales. The two competitors actually attempted a merger back in 1997, but had it blocked by antitrust regulators.



However, there are now far more retailers offering office supplies. This includes mass merchandisers such as Wal-Mart, as well as e-commerce platforms like Amazon.com. In approving a November 2013 merger between Office Depot and OfficeMax, the FTC noted that consumers have more options to buy office products than they did in 1997.



Activist investor Starboard Value LP, which owns stakes in both chains, has publicly promoted the idea of a merger and has suggested it may nominate its own candidates for the Staples board if the company does not pursue a merger. Both chains have been closing U.S. stores, testing smaller store formats, and promoting online sales.



Staples reported a 60% increase in net income during its most recent financial quarter, although it was driven by cost savings from store closures. The retailer also suffered a major data breach in summer 2014, which was made public in December. Office Depot reported declining profit in its most recent quarter, although the previous year period was inflated by the gain on a sale of its Office Depot de Mexico joint venture.



Sources indicated a merger is not guaranteed to happen.