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Staples to buy Office Depot for $6.3 billion

Staff writer |
Staples and Office Depot have entered into a definitive agreement under which Staples will acquire all of the outstanding shares of Office Depot.

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The transaction values Office Depot at $11 per share.
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. Based on Staples closing share price on February 2, 2015, the last trading day prior to initial media speculation around a possible transaction, the transaction values Office Depot at $11 per share.

This represents a premium of 44 percent over the closing price of Office Depot shares as of February 2, 2015, and a premium of 65 percent over the 90-day average closing price of Office Depot shares as of February 2, 2015. The transaction values Office Depot at an equity value of $6.3 billion.

The agreement has been unanimously approved by each company's board. With the acquisition of Office Depot, Staples will have pro forma annual sales of approximately $39 billion.

Staples expects to generate at least $1 billion of annualized cost synergies by the third full fiscal year post-closing. The majority of these synergies would be realized through headcount and general and administrative expense reductions, efficiencies in purchasing, marketing, and supply chain, retail store network optimization, as well as sharing of best practices. Staples estimates one-time costs of approximately $1 billion to achieve its synergy target.

In connection with the acquisition, Staples has obtained financing commitments from Barclays and BofA Merrill Lynch for a $3 billion ABL credit facility, and a $2.75 billion 6-year term loan. The closing of the transaction is not subject to financing conditions.

Staples is committed to maintaining its current quarterly dividend of $0.12 per share and has temporarily suspended its share buyback program to focus on paying down transaction related debt.


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