Office Depot Employees Nervous as Talks of Sale Loom

By Jason Schwartz

Employees at Boca Raton-based Office Depot headquarters were fearful as they headed in to work on Wednesday as news of a possible merger with Staples broke.

“How can anyone be at ease with news like this?” said one employee, who asked not to be identified. “I just moved my family from Illinois down here and we have not even settled in yet. I can’t deal with another change.”

Office Depot merged with OfficeMax in a $1.2 billion deal in 2013. Early in 2014, the combined company moved its headquarters from west suburban Naperville to Boca Raton.

Earlier this week Staples announced that it would acquire Office Depot for $6.3 billion in cash and stock.

If approved, the deal would unite the two biggest providers of office supplies.

“Office Depot will make Staples bigger, and most importantly, we also believe Office Depot will make Staples better,” Ron Sargent, chairman and CEO of Staples, said on a conference call with analysts.

Over time, the multiple brands will be combined under “one global name, Staples,” he said.

The companies put the transaction’s value at $6.3 billion. Together, the firms will have annual sales of approximately $39 billion.

“This is a transformational acquisition which enables Staples to provide more value to customers, and more effectively compete in a rapidly evolving competitive environment,” Sargent said.

Another employee, who identified himself only as Howard, was more optimistic.

“Anytime you have a merger between companies, jobs will be eliminated, no doubt,” he said. “But you will also have a leaner and stronger company and job security for some people.”

The agreement to combine the two companies comes after months of pressure from Starboard Value, a hedge fund that had threatened to press a management change at Staples if it did not pursue an acquisition of Office Depot.

The deal would be another victory for Starboard, which is riding a string of successes in its activist campaigns. Starboard last year successfully ousted the board of Darden Restaurants, the parent of the Olive Garden chain. Starboard had also been agitating Yahoo to spin off its stake in the Chinese e-commerce giant Alibaba, which the company announced it would do last month.

In this digital age, people just aren’t buying pens and pencils like they used to, and Staples is feeling the pressure from all sides, including from giants WalMart and Amazon.

“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. “This transaction creates significant value for Staples and Office Depot shareholders.”

Last year, Staples announced plans to close 12 percent of its more than 1,300 stores in the United States. Office Depot has about 1,900.

The struggling office supply retailer said the merger will mean cost savings of about $1 billion per year.

The companies said they expected the deal to close by the end of this calendar year. Staples will increase the size of its board to 13, from 11, adding two Office Depot directors.

“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 chief executive 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.”

This report was supplemented with information from wire services.