OfficeMax, Office Depot Provide Merger Update; Reaffirm Synergies Target

(RTTNews) - OfficeMax Incorporated (OMX) and Office Depot, Inc. (ODP) on Monday provided an update on the integration planning process and expected annual cost-saving synergies related to their' proposed merger.

In February, office products retailer Office Depot agreed to buy peer OfficeMax in an all-stock deal valued at about $1.2 billion. The merger will create an 18 billion global office solutions company in order to fight competition from market leader Staples, Inc. (SPLS) and Amazon.com, Inc. (AMZN).

Office Depot and OfficeMax said they continue to partner closely with management consulting firm Boston Consulting Group that was retained in May to provide integration support. The integration planning process has made significant progress since then.

Based on their integration planning work to date, the companies reaffirmed confidence in their ability to realize $400 million to $600 million of total annual cost synergies by the end of the third year following the close of the merger.

The companies believe about one third of the $400-$600 million range of synergies are achievable in the first year following the close of the merger. The companies also reiterated their expectation to incur about $350-450 million in one-time costs, including transaction expenses, and about $200 million in capital investment to achieve the cost synergies.

With the recently announced departure of Bruce Besanko, Executive Vice President, Chief Financial Officer and Chief Administrative Officer of OfficeMax, co-leadership of the integration planning process will transition fully to Steve Parsons, Executive Vice President and Chief Human Resources Officer of OfficeMax.