NEW YORK (AP) — Office Depot and OfficeMax are being collated.
The retailers said today they have agreed to combine in an all-stock deal worth about $1.2 billion that would transform the office-supply retail sector, helping the No. 2 and No. 3 chains compete against industry behemoth Staples.
Liang Feng, a Morningstar analyst, said the combination would be positive for the companies. But he said it might not be enough to help the combined company succeed in the changing marketplace.
“The industry will face longer term structural headwinds with competitors like Amazon, Costco gaining ground and the decline in demand for secular office products like paper, pens and ink,” he said.
Office Depot Inc. and OfficeMax, along with bigger rival Staples Inc., helped pioneer the big-box boom in the 1990s. But the rise in competition from web retailers like Amazon.com and discounters like Costco has been tough on the sector, leading to decreased sales.
Over the years, the companies have closed stores, slashed costs and streamlined operations to offset stagnant sales. But the industry was still seen as too bulky, and for years, rumors about possible consolidation have swirled around the sector, which is worth about $21.2 billion, according to research firm IBISWorld Inc. Of that, Staples holds a 35 percent market share, Office Depot has 26.1 and Office Max has 15.6.