Office Depot and OfficeMax are being collated.
The retailers said Wednesday they have agreed to combine in an all-stock deal worth about $1.2 billion that would transform the office-supply retail sector, helping the No. 2 and No. 3 chains compete against industry behemoth Staples. The first move toward consolidation in an industry that is bloated with stores reflects the changing retail landscape as "big box" stores have become outmoded and more people shop online.
Liang Feng, a Morningstar analyst, said the combination would be positive for the companies. But he said it might not be enough to help the combined company succeed in the changing marketplace.
"The industry will face longer term structural headwinds with competitors like Amazon, Costco gaining ground and the decline in demand for secular office products like paper, pens and ink," he said.
Office Depot Inc. and OfficeMax, along with bigger rival Staples Inc., were all founded in the mid- to late 1980s and helped pioneer the big-box boom in the 1990s. They expanded rapidly in the U.S. throughout the decade.
But the rise in competition from web retailers like Amazon.com and discounters like Costco and Wal-Mart has been tough on the sector, leading to decreased sales. In addition, office suppliers were slow to bounce back from the recession, as consumers and small businesses alike cut back on ordering office products.
Read more at the Associated Press.