Staples to Buy Office Depot in Deal That Consolidates Office-Supply Industry

Office Depot Is Still in the Midst of Unifying Its Brand After OfficeMax Acquisition

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A Staples ad down the street from a newly-closed Office Depot location in Times Square in December 2014.
A Staples ad down the street from a newly-closed Office Depot location in Times Square in December 2014.

Staples agreed to buy Office Depot for $11 a share, or an equity value of about $6.3 billion, in a deal that would reduce the U.S. office-supply industry to a single major chain.

The two companies, which forged the merger after pressure from activist investor Starboard Value, would create a retail chain with about $39 billion in revenue and thousands of stores. The deal will draw scrutiny from the Federal Trade Commission, though regulators have been increasingly willing to approve retail mergers in light of burgeoning e-commerce competition.

Ron Sargent, CEO of Framingham, Mass.-based Staples, said the purchase would help it cope with a "rapidly evolving competitive environment," letting the retailer expand into new product categories and cut costs.

"This is a transformational acquisition," he said in the statement. "We expect to recognize at least $1 billion of synergies as we aggressively reduce global expenses."

Mr. Sargent will remain as Staples' chairman and CEO after the merger, but the company did not say whether Staples EVP-Marketing Frank Bifulco or Office Depot CMO Tim Rea will head up marketing.

The combined retailers spent $180 million in U.S. measured-media in 2013, according to Kantar Media. Together, Office Depot and OfficeMax spent $105 million, while Staples, which also owns b-to-b supplies brand Quill, spent $75 million.

Office Depot and OfficeMax, which merged in November 2013, are in the midst of building a unified brand. The combined company rolled out a new brand push last month, called "Gear Up For Great," in an effort to unify its messaging.

It was the company's first campaign since it tapped Interpublic's McCann, New York and UM as its advertising and media agencies-of-record last September.

The company has consolidated its website under the Office Depot name, but it maintains separate social profiles for Office Depot and OfficeMax, though they feature many of the same posts. CMO Tim Rea told Ad Age the brand is in the process of combining its overall web presence, but he did not give a timeframe for when that will be completed.

Staples has been running a campaign called "Make More Happen" since 2013, which highlights the retailers expanded inventory -- including breakroom supplies, electronics and furniture -- and is meant to position the company as a destination for everything a business needs to succeed. The push came amid growing competition in the office-supply space from online retailers like Amazon and mass merchants like Walmart and Target.

The office-supply giant works with Dentsu-owned shops including McGarryBowen for integrated creative duties and Carat for media. Independent agency Edelman handles public relations.

Staples said Wednesday it expected the deal to close by the end of this year. Until that time, Staples will continue to focus on its strategic reinvention plan, and Office Depot will remain focused on its integration of OfficeMax, Staples said.

-- With contributions from Bloomberg News --

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