As we predicted in late 2011, the office supplies sector might be ready for consolidation. The Chicago Tribune reports that Office Depot has started negotiations for the acquisition of rival OfficeMax. If it goes through, the deal will likely be structured as a stock-for-stock transaction.
Both retailers have recently launched smaller store formats in order to compete in a world where consumers can take care of a lot of their office supplies needs online, but it may not be enough for long-term survival.
According to the Tribune:
By combining, the pair could cut costs by shedding stores and streamlining operations without having to raise prices. Tilghman estimates the companies could get rid of 20 percent of their combined stores and still hold onto customers.