Should OfficeMax And Office Depot Just Merge Already?

Unemployment is still up, and companies are doing more and more paperless business as time passes. So does the United States really need three competing big-box office supply retailers? The company that holds the most shares of Office Depot doesn’t think so, and most experts agree. Merging two smaller chains that people mix up anyway and that have one very large competitor should be a no-brainer.

Bloomberg News laid out the reasons why it probably should happen, but a merger or other big changes at Office Depot are likely whether its current leadership wants it or not. Office Depot is now trying to keep Starboard, its biggest owner, from taking control of the company. They’ve created a “poison pill” mechanism, which issues additional stock to shareholders when any one entity buys up 15% or more of the company without the board’s approval. Investment firm Starboard now holds 14.8% of Office Depot’s stock, and has made it clear that they think the company needs to reduce store and inventory size, cut costs, and cut back on advertising.

Staples does about three times as much business as Office Depot and twice as much as OfficeMax. Neither of the smaller companies is spectacularly successful, but both posted a profit last quarter.

Maybe a hostile takeover won’t be necessary. Sometime this spring, Office Depot will hold its annual meaning, and all seats on the board are up for re-election.

Office Depot-OfficeMax Deal Seen Rescuing Value: Real M&A [Bloomberg]