This represents a 25% premium over Friday's close, and will be paid to OfficeMax shareholders 70% in Boise Cascade stock, 30% cash. The transaction is collared, so should shares of Boise Cascade fall beneath a threshold, the cash component will increase. Both boards have approved the deal.
Boise Cascade once upon a time competed exclusively in the paper-products business with the likes of International Paper
This is a smart move for Boise Cascade, though it does offer some risks. One raison d'être for big-box office supply stores like OfficeMax is aggregation of choice. If it's not careful, Boise Cascade could undermine this advantage. Should it decide to pressure OfficeMax to push Boise Cascade products to the detriment of the overall customer experience, OfficeMax will suffer at the hands of rivals offering products from a wider range of suppliers.
Or suffer more, I should say. Our Warren Gump discussed OfficeMax in a column in May 1999 describing the company's losses to competitors Office Depot
Remember, the big-box retailers' stock in trade is the ability to offer competing products, cheaply. There will be plenty of synergies between the paper products provided by Boise Cascade (which have decreased as a revenue component by more than 80% in a decade), its office products, and its distribution network with OfficeMax's retail presence.
It's a delicate balance, to be sure, but at this point, it's Boise Cascade's game to lose. Let's hope they don't press the synergies too hard and undermine OfficeMax's ability to compete with its rivals even further.
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