Starboard Value Wins on $6.3 Billion Staples-Office Depot Deal

Feb 4 2015 | 9:23am ET

Staples announced plans to purchase rival Office Depot for $6.3 billion after months of pressure from activist fund Starboard Value.

“This transaction delivers great value for our shareholders and creates a company ideally positioned to serve our customers and grow over the long term,” Roland Smith, the CEO of Office Depot, said in a statement. “It is also an endorsement of our many accomplishments and the tremendous success we’ve had integrating Office Depot and OfficeMax over the past year. We look forward to bringing our experience and knowledge to the new organization.”

The deal is a big win for Starboard Value, which owns a 6% stake in Staples and nearly 10% of Office Depot stock. 

On Tuesday, Office Depot stock soared more than 21% as deal rumors leaked. Following confirmation of the purchase, the stock jumped another 6% in premarket hours.

The deal will combine the two largest office retailers in the country, which could fuel antitrust scrutiny. In 1998, the two companies attempted a horizontal merger, but regulators refused. Today, given the rise of competition from retailers like Target and Wal-Mart and e-commerce giant, the deal should face less opposition.

The deal is expected to create significant value for the newly combined company. 

Just two weeks ago, Starboard made its first public declaration for the merger in an open letter to the Wall Street Journal. Inside, Starboard said it believes this merger should include a cost-cutting and store-closing strategy that could fuel a "doubling in operating profits."

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