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Naperville-based OfficeMax’s shares jump on Office Depot merger speculation

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Updated: March 21, 2013 6:48AM



Shares of local office supply chain OfficeMax soared 20.9 percent on Tuesday amid reports that it will soon merge with rival Office Depot, but a Chicago analyst said OfficeMax could end up closing its Naperville headquarters if the consolidation happens.

OfficeMax and Office Depot have been rumored for years to be interested in merging to better challenge bigger rival Staples — the No. 2 e-commerce sales retailer after Amazon.com.

The urgency of a merger has increased as small-business customers tighten their belts, use tablets to keep records and go online to order supplies, and as reports surfaced that Office Depot would sell its remaining stake in its Mexican operations, analysts said.

With 1,500 employees in Naperville, OfficeMax is that city’s seventh-largest employer, Assistant Finance Director Chris Smith said. Naperville collects 10 percent of OfficeMax’s property tax payments, but no one could provide a figure on Tuesday for those payments.

Because Office Depot has more stores, more employees and a bigger market capitalization than OfficeMax, the Naperville company would likely be the one to move its headquarters, said Liang Feng, an equity analyst at Chicago-based Morningstar. Office Depot is based in Boca Raton, Fla.

“It is speculation on my part,” Feng said.

Office Depot has 1,675 stores to OfficeMax’s 900; 39,000 employees vs. OfficeMax’s 29,000, and $1.5 billion in market capitalization compared with OfficeMax’s $1.1 billion, Feng said. Office Depot generates $11.5 billion in yearly sales vs. OfficeMax’s $7 billion.

Feng said Office Depot and OfficeMax could stand to close 100 to 200 stores each, for a total of 200 to 400 stores in the next 10 years, because the companies built too many stores before the recession and make 25 to 30 percent less in sales per square foot than does Staples.

Another analyst speculated that OfficeMax’s CEO, Ravi Saligram, would lead the combined company.

Credit Suisse analyst Gary Balter wrote in a note to investors that Saligram has shown he can aggressively implement a strategic plan to improve the company’s operations.

Merger talks are said to be proceeding quickly, with a deal ready this week, but antitrust experts told Reuters newswire there was no guarantee the merger would win government approval.

Office Depot’s stock jumped as high as 30 percent during the day Tuesday before closing up 10 percent, or 42 cents, to reach a new 52-week high of $5.02. OfficeMax’s stock increased $2.25 to close at $13. Staples’ stock ended up 13.13 percent, or $1.70, to $14.65.



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