US retailer Office Depot is set to merge with rival OfficeMax for $1.2bn (£785m), in a deal marred by confusion and eventually leading to an abrupt announcement which came two hours ahead its scheduled time. Office Depot and OfficeMax said the merger would help them compete better with online retailers such as Staples and warehouse clubs, among others. Office Depot and OfficeMax expect the deal to yield annual cost savings of $400 million (£264m) to $600 million (£396m) within three years after its anticipated closing by the end of 2013. Office Depot-OfficeMax merger deal is aimed at creating ”a stronger, more efficient global provider better able to compete in the rapidly changing office solutions industry”, the companies said in a statement.
Under the all-stock merger deal, Office Depot will issue 2.69 shares for each OfficeMax share. That is equal to about $13.50 (£8.89) per share, based on Office Depot’s closing share price on Tuesday of $5.02 (£3.3), giving the deal a total value of about $1.2bn (£785m). Office Depot insisted the deal was a merger of equals and not an acquisition, although its shareholders would get the larger part of the combined company.
Office Depot chief executive Neil Austrian and OfficeMax CEO Ravi Saligram are both candidates vying for the top job. But Neil Austrian said it was premature to discuss who the CEO would be before the deal wins regulatory approval. Office Depot executives said their shareholders would own 51% of the combined entity, and OfficeMax shareholders would own 44%.
Office Depot preferred shareholder BC Partners would own 5%, assuming it follows through on a potential plan to convert some of its preferred stock to common shares. If BC Partners’ stake were fully redeemed, Office Depot shareholders would own 54% and OfficeMax 46%. Office Depot and OfficeMax will have equal representation on the combined entity’s board.