OfficeMax Inc (NYSE:OMX) and Office Depot Inc (NYSE:ODP) have been cleared to merge by the Federal Trade Commission. The companies announced the decision via a press release this morning and said they intend to close the deal next week on Nov. 5.
Shares of both retail chains rose in early morning trading after the announcement was made.
OfficeMax, Office Depot merger moves ahead
The companies expect the merger to complete after the close of business on that date, although it is still subject to certain conditions. The two office supply chains announced their intention to merge on Feb. 20. The FTC approved the merger because it does not view it as a threat to antitrust laws.
The Verge notes that this is the opposite of a 1997 decision which prevented Office Depot Inc (NYSE:ODP) from merging with Staples, Inc. (NASDAQ:SPLS). At that time, the agency did not see competitors like Wal-Mart Stores, Inc. (NYSE:WMT) as competitors to office supply stores. However, regulators have now decided that the role of office supply stores has eroded enough to consider Wal-Mart, Target Corporation (NYSE:TGT) and others as competitors for office supply stores. Also online retailers like Amazon.com, Inc. (NASDAQ:AMZN) are taking a chunk out of sales for office supply stores.
After the merger is completed
OfficeMax Inc (NYSE:OMX) and Office Depot Inc (NYSE:ODP) said they would provide additional information about the merger when the closing is complete. The companies said in their statement this morning that together, the two retail chains had combined revenue of about $17 billion for the 12 months ending June 29. As a result, they say the new combined company will have “significantly improved financial strength and flexibility” and be able to “deliver long-term operating performance and improvements through its increased competitiveness and cost synergies.”
The financial situation of both OfficeMax Inc (NYSE:OMX) and Office Depot Inc (NYSE:ODP) highlights how important a merger between the two chains may be. OfficeMax posted slight operating losses in August, while Office Depot posted falling margins and even bigger losses than OfficeMax.