Activist investor Starboard Value is encouraging the merger of rivals Staples (NYSE:SPLS) and Office Depot. According to people familiar with the matter, Starboard had taken a 5.1 percent stake in Staples and increased its existing holdings in Office Depot to about 10 percent.
Analysts and investors say a merger between the two companies could generate between $1.4 and $2 billion in synergies, reported CNBC.
Starboard has invested in Office Depot since 2012, prior to its 2013 merger with OfficeMax. At the time of the deal, Jeff Smith, Starboard founder, was on the board at Office Depot.
Staples and Office Depot did contemplate a merger in 1997, but pulled back due to possible antitrust regulations. However, since then, online competition has increased dramatically from big box retailers now aggressively selling in the office supply market.
It has been a challenging year for Staples, with sales expected to fall 5 percent. The retailer recently announced that it has closed 15 of its 331 stores in Canada in order to put more emphasis on the digital side of the business.
The office supply chain announced back in March that it planned to shut down 225 stores throughout North America, accounting for 12 percent of its brick-and-mortar locations in the region. It's all part of the company's attempt to cut costs and achieve greater efficiency as it competes with the likes of Amazon (NASDAQ:AMZN) and the now-merged Office Depot and OfficeMax (NASDAQ:ODP).
-See this CNBC article
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