Will Staples Acquire Office Depot?

According to bidnessetc.com Credit Suisse, a Switzerland- based multinational financial services company, is anticipating a merger of Staples and Office Depot. As disclosed, Credit Suisse believes that after the merger of Office Depot and OfficeMax, the two remaining office supply retail chains, Staples and Office Depot, are likely to consolidate as this will bring substantial financial and operational synergies. Credit Suisse points out four major reasons for its belief that a tie-up would benefit both companies.

• First, the consolidation will make the two companies more competent in combating outside threats from both traditional brick-and-mortar stores and online competitors.

• Second, if Staples acquires Office Depot, its stock price will more than double in a few years, even if it is purchased at an 80% premium (which contains the adjustments related to Office Depot and OfficeMax’s unrealized synergies).

• Third, Staples and Office Depot are downsizing due to intense competition; a merged entity will thus earn higher profits. A merger now rather than a merger later should then be the goal.

• Fourth, the merged entity could become a distribution company with a small retail segment, since a supplies distribution business will be more profitable than an individually operating retail chain.

Moreover, the service company predicted after consolidation, Staples stock will increase $30 from its current price of $12.3 by 2017.

(Note: On February 21, 2013, Recycling Times reported that Office Depot and OfficeMax announced the signing of a merger agreement, which will create an $18 billion combined company.)