April 9, 2013, 5:05 PM

Office Depot and OfficeMax move closer to merging

But the combined operation will still trail Staples in total web sales.

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Office Depot Inc. and OfficeMax Inc. are putting the executives in place to complete their $18 billion merger. But a combined and bigger operation still won’t make up the largest e-commerce organization in the online office supplies merchandising category.

Office Depot, No. 6 in the 2012 Internet Retailer Top 500 and OfficeMax (No. 12) have appointed a committee comprised of members from each retailers’ board of directors to oversee the process of integrating the two companies and looking for a new CEO.

Office Depot board member Nigel Travis, CEO of Dunkin Donuts, and OfficeMax board member Jim Marino, former president and CEO of Alberto Culver Co., will co-chair the selection committee, which also includes three other board members from each organization. The CEO selection committee will consider the qualifications of Office Depot CEO Neil Austrian and OfficeMax CEO Ravi Saligram as well as other yet-to-be identified outside candidates.

While various board members look for a CEO, other Office Depot and OfficeMax executives have been named to co-chair a committee charged with streamlining the merger between the companies before the end of the year, as well as coming up with annual cost savings ranging from $400 million to $600 million. OfficeMax executive vice president and chief financial/administrative officer Bruce Besanko will be the committee’s co-chairmen along with Office Depot chief financial officer Mike Newman.

Office Depot and OfficeMax in February announced the signing of a definitive merger agreement under which the companies would combine in an all-stock merger. Under the terms of the agreement, OfficeMax stockholders will receive 2.69 Office Depot common shares for each share of OfficeMax common stock. The merger makes the new entity an $18 billion company, based on projected 2012 sales, the companies said in a joint statement.

“The formation of the CEO selection committee and launch of our integration planning process represent important steps forward in achieving our vision of an $18 billion global office solutions company," Saligram says.

The formation of a combined office supplies retailer would give an Office Depot/OfficeMax organization an e-commerce operation with annual web sales of about $7.26 billion, according to Internet Retailer estimates in the soon-to-be published 10th anniversary edition of the Top 500 Guide.

But even with an organization approaching $8 billion in annual web sales, Office Depot and OfficeMax – combined and individually – still trail Staples Inc. by a wide amount. In 2012 Staples (No. 2) saw its web sales decline year over year about 2.8% from $10.60 billion to $10.30 billion. In comparison, Internet Retailer estimates Office Depot’s year over year e-commerce sales were essentially flat at about $4.1 billion, while OfficeMax grew web sales about 10.3% to about $3.20 billion from $2.90 billion.

OfficeMax credits a renewed push to acquire more small business customers and add new services such as web hosting and domain name registration from GoDaddy.com online and in stores as reasons for its rising e-commerce sales.“We again saw double-digit traffic and sales growth on OfficeMax.com for the quarter and the year,” Saligram told Wall Street analysts on the company’s year-end earnings call in February.

The 2013 and 10th anniversary edition of the Top 500 Guide in print, digital and database forms will be published in late April.

 

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