Should Office Depot merge with OfficeMax?
The two companies are considering joining forces in the face of an existential threat from Amazon
Shares of Office Depot and OfficeMax surged on Tuesday, following a report in The Wall Street Journal that the two companies are in the advanced stages of merger talks. A deal would theoretically help both companies grapple with a host of challenges, from flatlining revenue to Amazon's metastasizing clout within the retail industry.
Analysts have long expected Office Depot and OfficeMax — the second- and third-largest office supply chains in the world, respectively — to join forces. A deal would allow the combined company to cut costs by shuttering overlapping stores and laying off redundant workers. A combined company would also have more buying power over suppliers. And all this could be accomplished without losing many customers or raising prices.
The two companies have struggled mightily since the recession, which at one point in 2009 pushed Office Depot's share price to less than $1. At the same time, like all brick-and-mortar retailers, they have seen one-time customers drift to Amazon and other e-tailers that offer more competitive prices. Furthermore, the two Offices have failed to gain traction against Staples, the industry leader. Indeed, the only question may be whether an Office Depot-OfficeMax merger is coming too late. According to The Wall Street Journal:
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And as Mary Beth Quirk at Consumerist notes, it's not like OfficeMax and Office Depot are all that different: "When's the last time you realized which retailer you were actually visiting? Was it Max or Depot?"
There is one drawback to a merger, which is that one of the main beneficiaries would be Staples. As more OfficeMax or Office Depot stores close, Staples stands to gain more customers. As Andria Cheng at MarketWatch writes:
In the end, though, all three companies could soon face an even larger existential threat than Amazon — the rapid digitalization of a workforce that has grown less reliant on notepads, pens, and printers. And that may be a trend no merger can solve.
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Ryu Spaeth is deputy editor at TheWeek.com. Follow him on Twitter.
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