Staples looks to buy Office Depot

Staples Inc. has agreed to buy Office Depot Inc. for $11 a share, or an equity value of about $6.3 billion, in a deal that would reduce the U.S. office-supply industry to a single major chain.

Office Depot shareholders will get $7.25 in cash and 0.2188 of a share in Staples stock at closing, the retailers said in a statement Wednesday.

The two companies, which forged the merger after pressure from activist investor Starboard Value, would create a retail chain with about $39 billion in revenue and thousands of stores. The deal will draw scrutiny from the Federal Trade Commission, though regulators have been increasingly willing to approve retail mergers in light of burgeoning e-commerce competition.

Ron Sargent, CEO of Framingham, Massachusetts-based Staples, said the purchase would help it cope with a 'rapidly evolving competitive environment,” letting the retailer expand into new product categories and cut costs.

'This is a transformational acquisition,” he said in the statement. 'We expect to recognize at least $1 billion of synergies as we aggressively reduce global expenses.”

Staples had a market value of $12 billion based on Tuesday's closing price. Office Depot, based in Boca Raton, Florida, was pegged at $5 billion.

The FTC previously approved the merger of Office Depot and OfficeMax, the industry's second- and third-biggest chains, in 2013. The issue now is whether consumers will be harmed by bringing the industry down to one chain.

'The FTC's key question likely will be whether there is anything special about competition from office-supply superstores, such that reducing the number of competitors in that channel to one will result in higher prices to at least some consumers for at least some prices,” Amanda Wait, a former FTC lawyer who is now a partner at Washington-based Hunton & Williams LLP, said earlier this week.

Staples said on Wednesday that it expected the deal to close by the end of this year.