Staples pays $6.3 billion to acquire rival retailer Office Depot

The deal further consolidates the list of office supply retailers, with Office Depot, OfficeMax and Staples all combined into one entity.


Office supply chains Staples and Office Depot are officially tying the knot.

Staples announced Wednesday that it will buy Office Depot in a $6.3 billion deal, which according to the two companies, has been in discussion since last September.

"This is a transformational acquisition which enables Staples to provide more value to customers, and more effectively compete in a rapidly evolving competitive environment," Staples chairmand and CEO Ron Sargent said in a statement.

He added that the company expects the deal to reduce global expenses and optimize the chain's retail footprint as it works out a reinvention play that could mean breaking out beyond the office supply category.

If you recall, Office Depot bought OfficeMax back in 2013, which means that now all three of the main office supply chain retailers will now be combined into one entity.

As for Staples and Office Depot, the two retailers have had a long, complex relationship. While they are certainly rivals in the office supply space, a previous merger was attempted back in 1997. At the time, the FTC denied the deal, but thanks to increased competition from the likes of Walmart and Amazon, it is widely expected that won't be the case this time around.

There's also the issue of investor pressure. Starboard Value, a hedge fund with stock in both Office Depot and Staples, had previously threatened an executive shakeup if Staples did not pursue the Office Depot acquisition.

Looking at the big picture, there are obvious benefits to all parties now that the acquisition is in the works. To its credit, Staples ranks pretty high on the list of the world's largest Internet retailers, but the threat from e-commerce competitors remains strong and growing.

By joining forces, the unified office supply giant can consolidate and cost save on the back end (with an estimated $1 billion of synergies) while refocusing and revamping its consumer-facing strategy on the front end.

"Paper based office supplies are being replaced by technology, customer demand continues to shift online, we're going up against a wider set of competition," Sargent said during a conference call. "This transaction creates significant value for Staples and Office Depot shareholders."