Office Depot to be Purchased by Staples according to today’s announcement. The two companies have long been rivals but in a $6.3 million deal, Staples is planning to acquire Office Depot. With that, Staples will have the opportunity to conduct operations on a much larger scale, which in turn will boost profits.
Not too long ago, OfficeMax was purchased by Office Depot so this mega offer has the potential to take Staples to an entirely different playing field. As stated by Ron Sargent, CEO with Staples, while this will increase the size of operations and bolster profits, more importantly it will make the company better for consumers.
He added that this is a digital age and as such, consumers are not only buying things like pencils and pens. With other large corporations to include Amazon and Wal-Mart increasing their own digital inventory, Staples has been under a lot of pressure. As a result, the company said earlier this year that 12% of its stores would be closed.
Currently, there are roughly 1,300 Staples stores in the United States while Office Depot employs some 1,900 workers. With Staples going through a difficult period, the merger will ultimately save upwards of $1 billion annually. The plan is to reduce redundancy while optimizing the company’s retail footprint.
At this time, Staples did not comment on possible layoffs but based on the language being tossed around, there is a strong indicator that additional stores will be closing their doors and more people will be without work.
Sargent did comment that while Staples plans to continue selling the more traditional type products, in 2016, 50% of sales will not be based on common office supplies. He mentioned that Staples now has an established print and copy operation. In addition, consumers buy more than one million of individual items through the company’s website.
If the merger is approved by regulators, it would bring three solid brands together. Most people believe the deal will be approved and go through as planned but there is concern among some based on the 1996 deal between Office Depot and Staples in which the merger was halted by the government.
However, considering the 2013 deal between Office Depot and OfficeMax was approved, there is a good chance the Federal Trade Commission (FTC) will also approve the Staples and Office Depot deal. Staples ranks as number one as far as office supplies retailers with Office Depot being number two. Therefore, if the deal goes through as planned, it will turn the pressure on rivals.