Staples’ purchase of Office Depot creates uncertainty for local stores

LONGMONT — Within less than three miles along Ken Pratt Boulevard in south Longmont, three national office-supply retailers are open for business: Staples, OfficeMax and Office Depot.

They soon could be all one company – and something would have to give.

Framingham, Mass.-based Staples Inc. (Nasdaq: SPLS) has agreed to buy Boca Raton, Fla.-based Office Depot Inc. (Nasdaq: ODP) in a $6.3 billion deal that comes a bit more than a year after Office Depot merged with OfficeMax Inc. and nearly 18 years after a Staples-Office Depot merger was rejected by federal regulators.

Since that first failed merger, discounters and Internet-based retailers have become a major factor in the office-supply business, and if the regulators and anti-trust watchdogs relent this time, the nation would be left with one major big-box chain targeting business needs.

What happens to all those stores? Obviously, many would close. But which, and where?

“I just got here from Depot,” said Shane Stade, who had worked at the Office Depot store at 3500 S. College Ave. in The Square shopping center in Fort Collins before it closed in late 2013. Now general manager at the Staples store at 210 Ken Pratt Blvd. in the Harvest Junction retail area of Longmont, Stade is waiting to see how it all shakes out.

“I’ve spoken to my bosses,” he said, “but I don’t think anybody knows what’s going to happen yet. I know Office Depot had a plan for it and the OfficeMax stores, but I don’t know what happens to that now.”

“A lot of cities on the Front Range have this situation,” Stade added.

The manager on duty at Office Depot, 2251 Ken Pratt Blvd. in Longmont, declined comment. Longmont also has an OfficeMax at 1120 Ken Pratt.

Ron Sargent, Staples’ chief executive, acknowledged to analysts during a conference call that many of the three chains’ stores lie within five miles of each other. That situation is magnified in Boulder, where all three retailers are within minutes’ walk of each other in and around the Twenty Ninth Street shopping area. Staples is at 1601 29th St., Office Depot is at 1905 28th St., and OfficeMax is at 1880 30th St.

Fort Collins has an Office Depot at 2216 E. Harmony Road, an OfficeMax at 2211 S. College and a Staples in Front Range Village at 4333 Corbett Drive.

Staples also has a store at 1665 Rocky Mountain Ave. in Loveland. Office Depot is at 277 E. 29th St. in Loveland and 2825 35th Ave. in Greeley. OfficeMax is at 4759 W. 29th St. in Greeley and 410 Center Drive in Superior.

“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,” Staples said Wednesday in a media release. “Staples will remain focused on its strategic reinvention plan, and Office Depot will remain focused on its integration of OfficeMax during this period.”

Under the terms of the agreement, when the deal closes, Office Depot shareholders would receive $7.25 in cash per share and 0.2188 of a share in Staples stock at closing. Concerns about anti-trust opposition to the deal sent Staples’ stock price down 10 percent to $17.10 per share today. Shares of Office Depot rose 1.4 percent to $9.41, below the proposed merger value of $11 a share.

With the acquisition of Office Depot, Staples would have pro forma annual sales of approximately $39 billion, the media release said.

The move to combine two of the largest office-supply distributors could raise Federal Trade Commission questions, Sargent said, but he added that “Amazon just launched a business-to-business office-products initiative, They’re knocking on the door.” The nation’s largest retailer, Bentonville, Ark.-based Wal-Mart Stores Inc. (NYSE: WMT), in recent weeks launched a nationwide advertising campaign to tout its own office-supply inventory.

Staples agreed to pay Office Depot $250 million if antitrust concerns scuttle the deal.

Office Depot is in the process of closing hundreds of stores across the nation to avoid duplication issues as it takes in OfficeMax. Staples, which has been in talks to buy Office Depot since September, said it would close about 225 stores. Since their merger closed in late 2013 after a seven-month FTC investigation, Office Depot and OfficeMax have featured co-branding in their advertising.

Retail analyst David Strasser told investors for Janney Capital Markets in a report today that he expects the merger partners will close 1,000 stores in the next couple of years.

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