On February 4, 2015, Office Depot and Staples Inc. (NASDAQ: SPLS) announced that the companies had entered into a definitive agreement under which Staples will acquire all the outstanding shares of Office Depot. Under the terms of the agreement, Office Depot shareholders will receive, for each Office Depot share, $7.25 in cash and 0.2188 of a share in Staples stock at closing. The transaction is expected to close in 2015.
Considering the merger, Office Depot gave its guidance as expected merger synergy benefits of $750 million and at least 400 store closures by the end of 2016. There are consensus estimates of $0.46 in EPS on $14.84 billion in revenue.
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Roland Smith, chairman and CEO of Office Depot, said:
In the second quarter we significantly improved operating income versus last year, primarily due to continued excellent execution on our merger integration, synergies and efficiencies, and positive same-store sales growth. While total company sales declined compared to prior year, driven primarily by planned store closures and foreign currency translation, continued success in the consolidation of our U.S. retail store portfolio and increased operational effectiveness drove positive quarterly same-store sales growth for the first time in many years. We are especially pleased with our performance in light of the inherent disruption associated with the pending acquisition by Staples. We continue to focus on executing our Critical Priorities and remain on track with the Office Depot/OfficeMax merger integration and our European restructuring.
At the end of the quarter, Office Depot had $867 million in cash and cash equivalents and approximately $1.2 billion available under its amended and restated credit agreement, for total available liquidity of approximately $2.0 billion.
Shares of Office Depot closed Monday at $7.90. Following the release of the earnings report, shares were up 1% at $7.98 Tuesday morning. The stock has a consensus analyst price target of $10.63 and a 52-week trading range of $4.26 to $9.77.
Staples shares closed Monday at $14.13, in its 52-week range of $10.82 to $19.40. Tuesday morning, shares were up 1.3% at $14.32. The consensus price target is $18.62.
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