US office supply retailers Office Depot and OfficeMax in merger talks: report

Office Depot Inc, the second-largest US office supply retailer is in talks to merge with smaller rival OfficeMax Inc, a deal which will see the merged company still trailing industry leader Staples Inc, The Wall Street Journal yesterday reported, citing people familiar with the matter.

The deal, which may be announced as early as this week, is expected to be an all stock merger, although the paper could not determine what percentage of shares would be held by shareholders of each company post merger.

Office Depot, based in Florida, has a market value of $1.3 billion, while that of Illinois-based OfficeMax is about $933 million.

Both companies have recently come under pressure over declining sales due to a slowdown in the US economy, rising online competition and consumers buying from mass merchants.

Late last week, Bloomberg reported that Office Depot is in talks to exit its equal joint venture in Mexico by selling its stake in Office Depot de Mexico to its local partner Grupo Gigante SAB.

Office Depot, which also has an Indian joint venture with Mukesh Ambani-led Reliance Retail, has come under pressure from Starboard Value LP, an activist shareholder with 14.8 per cent stake, which has been urging the management to improve shareholders value by cutting general expenses, lower advertising costs and move to smaller stores.