OfficeMax ( OMX ) and Office Depot ( ODP ) are in advanced talks to merge in a stock-for-stock deal, The Wall Street Journal reported Monday.
Citing sources familiar with the matter, the report indicated that talks between the two office supply retailers are fluid and could still fall apart, but an announcement may come as early as this week.
Spokespeople for OfficeMax and Office Depot each told FOX Business that their companies do not comment on rumors or speculation.
Competition from rival Staples ( SPLS ) and online retail giant Amazon.com ( AMZN ) have weighed on both OfficeMax and Office Depot.
In 1997, Staples and Office Depot attempted to merge but were blocked by the Federal Trade Commission, which cited diminished competition and the threat of higher prices.
Now office supply retailers face competition from rival chains like Wal-Mart Stores ( WMT ) and online merchants, putting pressure on OfficeMax and Office Depot to cut costs. A merger would provide a cost-cutting opportunity through synergies.
While shares of OfficeMax are up nearly 91.6% over the last 52 weeks, as of Friday’s market close, its market value is just $932.5 million. Office Depot’s stock has risen about 46.6% in the last year, and its market value is $1.3 billion.
Staples is valued at more than $8.7 billion.
Florida-based Office Depot does have 1,675 stores world-wide, posting about $11.5 billion in annual sales. The company said in November that it expects sales declines to ease over the next couple years.
Office Depot’s largest shareholder, activist hedge fund Starboard Value, has pushed the company to slim down. Office Depot adopted a “poison pill” that is meant to deter hostile takeovers and kicks in when a shareholder that holds at least a 15% stake tries to buy the company. Starboard disclosed a 14.8% stake in September.
OfficeMax has around 900 stores in the U.S. and Mexico and records approximately $7 billion in annual sales. The Illinois-based company is scheduled to release its fourth-quarter and annual results Thursday.
