Staples Announces Acquisition of Office Depot

Staples, Inc. (Staples) and Office Depot, Inc. (Office Depot) announced they reached a definitive and unanimous agreement under which Staples will acquire all of the outstanding shares of Office Depot at a cost of US$6.3 billion. The deal will bring approximately US$39 billion annual sales to Staples.

In September 2014, it is anticipated that Staples will acquire Office Depot and the speculation came to truth now. According to Staples, it expects at least US$1 billion of annualized cost synergies will be generated by the third full fiscal year post-closing. The majority of these synergies would be realized through headcount and general and administrative expense reductions, efficiencies in purchasing, marketing, and supply chain, retail store network optimization, as well as sharing of best practices. Staples estimates one-time costs of approximately US$1 billion to achieve its synergy target. Further, Staples obtained financing commitments from Barclays and BofA Merrill Lynch for a US$3 billion ABL credit facility, and a US$2.75 billion 6-year term loan.

Based on the acquisition, Staple’s new Board of Directors will constitute of 13 members, including 2 office Depot directors approved by Staples. As Staples’ Chairman and CEO, Ron Sargent continues to lead the Board of Directors. Staples and Office Depot tagged the following personnel arrangements: Barclays is acting as exclusive financial advisor to Staples; Wilmer Cutler Pickering Hale and Dorr LLP and Weil, Gotshal & Manges LLP are acting as legal advisors to Staples; Peter J. Solomon Company is acting as exclusive financial advisor to Office Depot; Simpson Thacher and Bartlett LLP are acting as legal advisors to Office Depot.

Ron Sargent, Staples’ chairman and CEO, expressed, “This is a transformational acquisition which enables Staples to provide more value to customers, and more effectively compete in a rapidly evolving competitive environment. We expect to recognize at least US$1 billion of synergies as we aggressively reduce global expenses and optimize our retail footprint. These savings will dramatically accelerate our strategic reinvention which is focused on driving growth in our delivery businesses and in categories beyond office supplies.”

Roland Smith, chairman and CEO for Office Depot, asserted, “This transaction delivers great value for our shareholders and creates a company ideally positioned to serve our customers and grow over the long term. It is also an endorsement of our many accomplishments and the tremendous success we’ve had integrating Office Depot and OfficeMax over the past year. We look forward to bringing our experience and knowledge to the new organization.”

In the announcement, it is claimed that the transaction is subject to customary closing conditions, including antitrust regulatory approval and Office Depot shareholder approval. The transaction is expected to close by the end of calendar year 2015. Staples will remain focused on its strategic reinvention plan, and Office Depot will remain focused on its integration of OfficeMax during this period.

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