Staples to Buy Office Depot; Closure in Cranston Likely

Cranston could be losing one of its two office supply retailers in close proximity in the Garden City area as Staples is expected to buy its rival Office Depot, in a cash and stock deal valued at $6 billion today, Feb. 4.

Staples, Inc. and Office Depot, Inc. announced today that they have entered into a definitive agreement under which Staples will acquire all of the outstanding shares of Office Depot.

Under the terms of the agreement, Office Depot shareholders will receive, for each Office Depot share, $7.25 in cash and 0.2188 of a share in Staples stock at closing. Based on Staples closing share price on February 2, 2015, the last trading day prior to initial media speculation around a possible transaction, the transaction values Office Depot at $11.00 per share.

The combined company is expected to close numerous locations across the country as it consolidates operations into one office supply retail behemoth.

In Cranston, there is an Office Depot in the popular Garden City Shopping Center by LA Fitness. And across Sockanosset Cross Road is a new Staples that was built in 2013 as part of an ongoing expansion of Johnston-based Carpionato Group’s Chapel View shopping complex.

Both companies have not released any specific plans to close either store, but local officials have cause to believe that one will probably be shuttered.

“This is a transformational acquisition which enables Staples to provide more value to customers, and more effectively compete in a rapidly evolving competitive environment,” said Ron Sargent, Staples’ chairman and chief executive officer. “We expect to recognize at least $1 billion of synergies as we aggressively reduce global expenses and optimize our retail footprint. These savings will dramatically accelerate our strategic reinvention which is focused on driving growth in our delivery businesses and in categories beyond office supplies.”

“This transaction delivers great value for our shareholders and creates a company ideally positioned to serve our customers and grow over the long term,” said Roland Smith, chairman and chief executive officer for Office Depot, Inc, in a press release. “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.”

Staples said that it would save $1 billion through layoffs, store closings, administrative expense reductions and purchasing efficiencies.

Staples’ corporate headquarters will remain in Framingham, Mass. and Sargent will continue to serve as Staples’ Chairman and Chief Executive Officer.

The transaction is subject to customary closing conditions, including antitrust regulatory approval and Office Depot shareholder approval, and is expected to close by the end of calendar year 2015.

Barclays is acting as exclusive financial advisor to Staples. Wilmer Cutler Pickering Hale and Dorr LLP and Weil, Gotshal & Manges LLP are acting as legal advisors to Staples. Peter J. Solomon Company is acting as exclusive financial advisor to Office Depot. Simpson Thacher & Bartlett LLP is acting as legal advisor to Office Depot.

Last month, an investment company that owns stock in both Staples and Office Depot wrote a letter to Staples suggesting the merger.

In its letter to Staples, Starboard said a merger with Office Depot would be needed to double the operating profits of the combined company.

“If it becomes clear to us that you have no intention of seriously pursuing this unique and highly attractive opportunity, it would be a clear sign that significant leadership change is needed at Staples,”wrote Starboard in its letter.

In January, Staples announced it plans to separate the CEO and chairman roles.

Also last month, Staples announced it “values constructive shareholder input and dialogue and regularly meets with its shareholders. The Company has met and spoken with Starboard Value on several occasions to discuss their ideas,” said the Framingham-based company in a statement.