OfficeMax, Office Depot Say Merger on Track

Business supply retailers OfficeMax (NYSE: OMX  ) and Office Depot (NASDAQ: ODP  ) have created an Integration Management Office (IMO) for daily integration planning to help as they complete their merger, as well as 12 integration planning teams and five integration platform teams to help ensure business continuity and execute the IMO's work plans.

The merger is expected to be complete by the end of the year; the FTC review is ongoing. In a press release this week, the companies outlined their merger progress and reiterated expected savings from the merger. The companies anticipate $400 million to $600 million in total annual cost synergies by the end of the third year following the merger, broken down as:

  • $70 million to $100 million in advertising and marketing, including reducing duplicative efforts in weekly inserts and catalogs.
  • $130 million to $200 million savings in selling, general, and administrative expenses.
  • $70 million to $100 million from combining their North American supply chains.
  • $130 million to $200 million from purchasing efficiencies.

The companies believe approximately one-third of the $400 million to $600 million in savings are achievable in the first year. Office Depot and OfficeMax also expect to incur approximately $350 million to $450 million through one-time costs and approximately $200 million in capital investment to achieve the expected cost synergies.

Both companies are partnering with The Boston Consulting Group to create as smooth an integration process as possible. Steve Parsons, executive vice president and chief human resources officer of OfficeMax, and Mike Newman, executive vice president and chief financial officer of Office Depot, are leading the integration planning process.

 

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