Office Depot Shareholders Vote to Merge with Staples

Office DepotOffice supply chain Staples, Inc. (NASDAQ/SPLS) won approval to buy Office Depot, Inc. (NASDAQ/ODP). This is another example of how the rapidly-changing way in which consumers shop has led to a major consolidation in the retail office supply business.

On Friday, June 19th, Office Depot shareholders voted overwhelmingly in favor of the company’s acquisition by Staples. The deal values the retail supply chain at $6.3 billion. Because the deal was widely expected to win approval, shares of both companies were little changed on the news.

The deal is part of the consolidation of the office supply industry that has been hammered by technological changes and online competition. According to data provider Statista Inc, sales in the office supply industry dramatically dropped by 30% from 2007 to 2013.

Retailers have been shuttering stores in response. Staples and Office Depot are expected to close 360 combined stores by the end of 2015.

Federal regulators aren’t expected to protest the acquisition. The Federal Trade Commission (FTC) is reviewing the proposed deal in an extent that has changed significantly since it blocked an attempted merger between the two office suppliers almost a decade ago.

Regulators quickly approved Office Depot’s acquisitions of OfficeMax just a year ago.

In February, Staples CEO Ron Sargent said only that the consolidated company would be based at its campus in Framingham, MA, and that a “presence” would be considered in Boca Raton.

Office Depot said on Friday that 99.5% of the votes cast were in favor of the deal, which is expected to close by the end of the year. If approved by regulators, Office Depot shareholders will get $7.25 per share in cash and 0.22% of a share in Staples stock for each Office Depot share held. (Source: Office Depot Inc., June 18, 2015.)

For investors, the deal would leave only one company with the capacity to deliver office supplies on a large scale in a struggling industry. Investors may not be optimistic of the overall industry unless this merger can overhaul the overall office industry.