Staples snaps up Office Depot for $6B to create supply giant

Office retailers began talking in September about a buyout

NEW YORK— The rapidly changing tools of the workplace and the way consumers shop has led to another major consolidation in the retail office supply business, as Staples announced the $6 billion (U.S.) acquisition of rival Office Depot Wednesday.

The cash-and-stock deal comes a little more than a year after Office Depot combined with OfficeMax, as too many stores battled for too few sales.

Businesses and consumers have shifted rapidly to online shopping at the same time that printers and the use of other traditional office supplies have diminished. That shift coincided with a recession that substantially altered the way companies spend money.

The new company is expected to have annual sales of approximately $39 billion.

Staples has a major presence in Canada, where it’s the largest office supply retailer, but Office Depot pulled out of the market several years ago. Office Depot Inc. shareholders will receive $7.25 in cash and 0.2188 of a share in Staples Inc. at closing. The transaction values Office Depot at $11 per share.

The companies put the deal’s equity value at $6.3 billion.

Staples has a market capitalization of approximately $11 billion, while Office Depot, which tied up with OfficeMax in November 2013, has a market capitalization of about $4 billion.

The two companies began talking about a buyout in September, they said Wednesday.

Staples said it will realize at least $1 billion in annual cost savings by the third full fiscal year after the transaction is complete.

“These savings will dramatically accelerate our strategic reinvention which is focused on driving growth in our delivery businesses and in categories beyond office supplies,” Staples chairman and CEO Ron Sargent said in a printed statement. Sargent will continue to serve in those roles and Staples will keep its corporate headquarters in Framingham, Mass.

Early last year, Staples said that it was closing up to 225 stores by the end of 2015 because people were using less office supplies and shopping more online than they were at its stores. Staples said that it is tempo- rarily suspending its stock buybacks so that it can concentrate on paying down debt related to the deal.