With an eye to delivering more “compelling value” to office products customers — including small office/home office (SoHo) and larger corporations — office supplies retailer OfficeMax reached a definitive agreement last week with Boise Cascade, for the paper maker and office products distributor to acquire OfficeMax for $1.2 billion.
OfficeMax — which is the third largest office supplies retailer of consumer electronics products, behind Staples and Office Depot, according to the TWICE Top 100 CE Retailers ranking — did $1.6 billion in CE sales in 939 stores in 2002. Staples registered $3.9 billion in CE sales in 2002, in 1,300 stores, while Office Depot did $2.7 billion in CE sales, in 867 stores, during the same period. OfficeMax is No. 15 among the Top 100.
“The business combination gives the newly formulated organization the ability to better serve all channels of the office products market — from home offices to small businesses to large corporations,” said Michael Feuer, OfficeMax co-founder and chairman/CEO. “Together, OfficeMax, with Boise, will be strategically and financially stronger, and rival the size of its closest competitors,” he said.
The transaction, which initially was precipitated by OfficeMax earlier in the year, according to Feuer, will cost Boise, Idaho-based Boise Cascade about $9 a share — a combination of 30 percent cash and 70 percent common stock. The purchase cost represents a 25 percent premium over OfficeMax’s closing price of $7.18 on July 11, and a premium of 30 percent over OfficeMax’s average trading price over the last 30 days.
It is expected that the deal will allow OfficeMax stores to become more competitive with its two larger retail rivals, while it will help increase sales of Bosie Cascade products, mainly office furniture, paper products and quick-print services.
OfficeMax will join Boise Cascade as part of its Boise Office Solutions group, a multi-national distributor of office technology products, office furniture and paper, which had sales of $3.5 billion in 2002. Office Solutions posted domestic e-commerce sales of more than $1 billion last year. Overall sales for the office, building and paper solutions giant Boise, formed in 1957, was $7.2 billion in 2002.
OfficeMax, which has reported four profitable quarters in its last five, has been re-emerging from two years of reorganization. The retailer reported an 85 percent drop in profit during its most recent fiscal first quarter, ended April 26, when net income fell to $9.8 million, compared with $63.5 million year over year. Consolidated sales for the quarter increased 4 percent, to $1.23 billion, compared with $1.18 billion in the same three months in 2002.
OfficeMax, which started 15 years ago as a single suburban store here, registered $4.8 billion in overall sales in its last fiscal year, up 3 percent from the $4.6 billion recorded the previous 12 months. Net income moved into the black during the last fiscal year, hitting $73.7 million, compared with a loss of $309.5 million the previous fiscal year.
The purchase deal, which has already been approved by the boards of both companies, is subject to customary approvals under antitrust laws and the shareholders of both operations. The transaction is expected to be completed in late fall or early winter.