Activist investor Starboard Value is calling for a Staples (NYSE:SPLS) and Office Depot (NASDAQ:ODP) merger, saying a combined office supply chain would lead to greater savings.
The hedge fund, which owns about 5.1 percent of Staples, recently boosted its stake in Office Depot to almost 10 percent.
The merger would create synergies of at least $2 billion, more than double the current operating profits, according to Starboard's founder and CEO Jeffrey Smith. Smith wrote a letter to Staples' CEO Ronald Sargent outlining the details, reported Reuters.
"The best way to maximize value for Staples' shareholders is through exploring and completing a business combination with Office Depot," Smith said in the letter, reported Bloomberg. "We believe that now is the right time to pursue such a transaction, and we urge you to immediately retain a reputable investment bank and legal advisers to assist the board in evaluating, structuring and executing a transaction."
Staples, however, is concerned about antitrust rules, according to those close to the matter. But the office chain responded that it would continue to consider all actions that "are in the best interest of the company's shareholders."
Staples 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.
-See this Reuters article
-See this Bloomberg article
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