Companies Gain Momentum in Integration Planning
More Than 150 Team Members from Both Companies Engaged in 17
Workstreams
Companies Reaffirm Synergies Target of $400-$600 Million
NAPERVILLE, Ill. & BOCA RATON, Fla.--(BUSINESS WIRE)--Jul. 29, 2013--
OfficeMax Incorporated (NYSE: OMX) and Office Depot, Inc. (NYSE: ODP)
today provided an update on the integration planning process and
expected annual cost-saving synergies related to the companies’ proposed
merger.
Office Depot and OfficeMax continue to partner closely with The Boston
Consulting Group (BCG), a global management consulting firm that was
retained in May to provide integration support. BCG has helped global
and multinational clients integrate hundreds of mergers and acquisitions
in the last five years.
The integration planning process has made significant progress since
being launched in May:
-
An Integration Management Office (IMO) has been established to guide
day-to-day integration design and planning, ensure interdependencies
and risks are identified, and make certain that mitigation plans are
developed. The IMO has created an overall integration methodology and
schedule, with clear governance guidelines.
-
Twelve integration planning teams, co-led by senior leaders of both
companies, have been formed with the goal of ensuring business
continuity, customer and talent retention and synergy attainment.
These teams have completed team charters, identified Day One
priorities and action plans, and developed detailed workplans for
their functional areas. These teams are in the process of identifying
the critical initiatives to execute after closing in order to deliver
the expected synergies and begin integrating the companies;
identifying best practices within the respective companies; and
designing an operating model and organizational structure for the
combined company.
-
Five integration platform teams have been established and are
executing detailed workplans to support the IMO and integration
planning teams with project management, synergy development,
communications, change management and talent management.
-
This collective integration team, comprised of more than 150 seasoned
leaders from both companies and with the support of a dedicated BCG
team, has extensive industry and functional expertise, broad
experience in the design and development of efficiency capture
programs, and integration planning expertise for mergers of varying
scale.
Based on their integration planning work to date, the companies
reaffirmed confidence in their ability to realize $400-$600 million of
total annual cost synergies by the end of the third year following the
close of the merger, with synergies categorized as follows:
-
Purchasing Efficiencies: An estimated total of $130-$200
million in synergies are expected to come from purchasing efficiencies
related to the combined cost of goods sold, including vendor
optimization and SKU harmonization.
-
Supply Chain: Approximately $70-$100 million in estimated
synergies are expected to result from combining the North American
supply chains. The companies believe that supply chain network
optimization, along with transportation and delivery efficiencies,
will generate these significant savings.
-
Advertising and Marketing: The companies estimate savings in
the range of $70-$100 million from advertising and marketing
efficiencies. A substantial amount of these savings are expected to
result from reducing duplicative efforts in weekly inserts, media and
catalogs.
-
Selling, General & Administrative: An estimated $130-$200
million in savings is expected to result from overall selling, general
and administrative cost efficiencies.
The companies believe approximately one third of the $400-$600 million
range of synergies are achievable in the first year following the close
of the merger. The companies also reiterated their expectation to incur
approximately $350-450 million in one-time costs, including transaction
expenses, and approximately $200 million in capital investment to
achieve the cost synergies.
With the recently announced departure of Bruce Besanko, Executive Vice
President, Chief Financial Officer and Chief Administrative Officer of
OfficeMax, co-leadership of the integration planning process will
transition fully to Steve Parsons, Executive Vice President and Chief
Human Resources Officer of OfficeMax. A member of the executive-level
Integration Steering Committee, Mr. Parsons has a strong experience base
in integration planning for mergers of varying complexity and scale, up
to and including multi-billion-dollar transactions, prior to joining
OfficeMax. Mr. Parsons will partner with Mike Newman, Executive Vice
President and Chief Financial Officer of Office Depot, who continues in
his co-leadership role.
“We recognize that the synergy benefits are an important part of the
shareholder value that is being created from this merger and I’m very
pleased with the tangible momentum of the integration planning process
so far,” said Neil Austrian, Chairman and CEO of Office Depot. “The
talent and dedication of the teams working on the integration give us
confidence that the combined company will deliver on our promise to
build a stronger, more efficient competitor positioned to meet the
growing challenges of a rapidly changing industry. We remain optimistic
that the merger will close by the end of the 2013 calendar year, and we
continue to work cooperatively with the FTC as it conducts its review of
the proposed combination.”
“We are extremely pleased with the progress we are making in our
integration planning, which will ensure a smooth transition for all of
our stakeholders and allow us to begin capturing identified cost
synergies starting on Day One,” said Ravi Saligram, President and CEO of
OfficeMax. “True to the spirit of our merger of equals structure,
objective decisions aimed at identifying the best systems and processes
for the combined company are being made at an appropriate pace. I have
been particularly impressed with the expertise and collaboration
demonstrated by integration team members of both companies, and my
confidence level in attainment of our synergies is even higher now.”
Transaction Details
On February 20, 2013, OfficeMax and Office Depot announced their entry
into an agreement to combine their companies in a merger of equals. On
July 10, 2013, stockholders of both companies approved the merger. The
transaction is expected to close by the end of calendar year 2013,
subject to regulatory approvals and the satisfaction of other customary
closing conditions.
As announced on June 11, 2013, the companies selected Korn/Ferry
International to assist the CEO Selection Committee, which is co-chaired
by OfficeMax Board Member Jim Marino, former President and CEO of
Alberto Culver Company and Office Depot Board Member Nigel Travis,
Chairman and CEO of Dunkin’ Brands, Inc. in its comprehensive search.
The committee is actively engaged in evaluating a slate of candidates,
including incumbent CEOs Ravi Saligram of OfficeMax and Neil Austrian of
Office Depot. The goal remains to identify a proven leader with the
strategic insight, operational discipline and inspirational leadership
required to transform the business and deliver the synergies that come
from combining the companies. Both incumbent CEOs will remain in their
current positions through the search process, which is anticipated to be
completed at or prior to the close of the transaction.
About OfficeMax
OfficeMax Incorporated (NYSE: OMX) is a leading provider of products,
solutions and services for the workplace, whether for business or at
home. The OfficeMax mission is simple: We provide workplace innovation
that enables our customers to work better. The company provides office
supplies and paper, print and document services, technology products and
solutions, and furniture to businesses and consumers. OfficeMax
consumers and business customers are served by approximately 29,000
associates through OfficeMax.com, OfficeMaxWorkplace.com, and
Reliable.com; more than 900 stores in the U.S. and Mexico, and direct
sales and catalogs. OfficeMax has been named one of the 2013 World's
Most Ethical Companies, and is the only company in the office supply
industry to receive Ethics Inside® Certification by the Ethisphere
Institute. To find the nearest OfficeMax, call 1-877-OFFICEMAX. For more
information, visit www.officemax.com.
About Office Depot
Office Depot provides office supplies and services through 1,628
worldwide retail stores, a field sales force, top-rated catalogs and
global e-commerce operations. Office Depot has annual sales of
approximately $10.7 billion, employs about 38,000 associates and serves
customers in 60 countries around the world.
Office Depot’s common stock is listed on the New York Stock Exchange
under the symbol ODP. Additional press information can be found at: http://news.officedepot.com.
All trademarks, service marks and trade names of Office Depot, Inc.
and OfficeMax Incorporated used herein are trademarks or registered
trademarks of Office Depot, Inc. and OfficeMax Incorporated,
respectively. Any other product or company names mentioned herein are
the trademarks of their respective owners.
FORWARD-LOOKING STATEMENTS
Certain statements made in this document and other written or oral
statements made by or on behalf of OfficeMax and Office Depot constitute
“forward-looking statements” within the meaning of the federal
securities laws, including statements regarding both companies’ future
performance, as well as management’s expectations, beliefs, intentions,
plans, estimates or projections relating to the future. OfficeMax and
Office Depot cannot guarantee that the macroeconomy will perform within
the assumptions underlying their respective projected outlook; that
their respective initiatives will be successfully executed and produce
the results underlying their respective expectations, due to the
uncertainties inherent in new initiatives, including customer
acceptance, unexpected expenses or challenges, or slower-than-expected
results from initiatives; or that their respective actual results will
be consistent with the forward-looking statements and you should not
place undue reliance on them. In addition, forward-looking statements
could be affected by the following additional factors, among others,
related to the business combination: the occurrence of any event, change
or other circumstances that could give rise to the termination of the
merger agreement or the failure to satisfy closing conditions; the
ability to obtain regulatory approvals or third-party approvals for the
transaction and the timing and conditions for such approvals; the risk
that the synergies from the transaction may not be realized, may take
longer to realize than expected, or may cost more to achieve than
expected; disruption from the transaction making it more difficult to
maintain relationships with customers, employees or suppliers; the
ability to successfully integrate the businesses; unexpected costs or
unexpected liabilities that may arise from the transaction, whether or
not consummated; the inability to retain key personnel; future
regulatory or legislative actions that could adversely affect OfficeMax
and Office Depot; and business plans of the customers and suppliers of
OfficeMax and Office Depot. The forward-looking statements made herein
are based on current expectations and speak only as of the date they are
made. OfficeMax and Office Depot undertake no obligation to publicly
update or revise any forward-looking statement, whether as a result of
future events, new information or otherwise. Important factors regarding
OfficeMax and Office Depot that may cause results to differ from
expectations are included in the companies’ respective Annual Reports on
Form 10-K for the year ended December 29, 2012, under 1A “Risk Factors”,
and in the companies’ other filings with the SEC.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
This communication is not intended to and does not constitute an offer
to sell or the solicitation of an offer to subscribe for or buy or an
invitation to purchase or subscribe for any securities in any
jurisdiction in connection with the proposed merger of Office Depot with
OfficeMax or otherwise, nor shall there be any sale, issuance or
transfer of securities in any jurisdiction in contravention of
applicable law. No offer of securities shall be made except by means of
a prospectus meeting the requirements of Section 10 of the Securities
Act of 1933, as amended. Office Depot has filed with the SEC a
registration statement on Form S-4 that includes a definitive Joint
Proxy Statement of Office Depot and OfficeMax that also constitutes a
definitive prospectus of Office Depot. The registration statement was
declared effective by the SEC on June 7, 2013. Office Depot and
OfficeMax mailed the definitive Joint Proxy Statement/Prospectus to
their respective shareholders in connection with the transaction on or
about June 10, 2013. INVESTORS AND SHAREHOLDERS ARE URGED TO READ THE
JOINT PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED OR
TO BE FILED WITH THE SEC CAREFULLY BECAUSE THEY CONTAIN OR WILL CONTAIN
IMPORTANT INFORMATION ABOUT OFFICE DEPOT, OFFICEMAX, THE TRANSACTION AND
RELATED MATTERS. Investors and shareholders are able to obtain free
copies of the definitive Joint Proxy Statement/Prospectus and other
documents filed with the SEC by Office Depot and OfficeMax through the
website maintained by the SEC at www.sec.gov.
In addition, investors and shareholders are able to obtain free copies
of the definitive Joint Proxy Statement/Prospectus and other documents
filed by Office Depot with the SEC by contacting Office Depot Investor
Relations at 6600 North Military Trail, Boca Raton, FL 33496 or by
calling 561-438-7878, and are able to obtain free copies of the
definitive Joint Proxy Statement/Prospectus and other documents filed by
OfficeMax by contacting OfficeMax Investor Relations at 263 Shuman
Blvd., Naperville, Illinois 60563 or by calling 630-864-6800.
Source: Office Depot, Inc.
Investors:
OfficeMax
Mike Steele, 630-864-6826
michaelsteele@officemax.com
or
Media:
OfficeMax
Julie
Treon, 630-864-6155
julietreon@officemax.com
or
Investors:
Office
Depot
Rich Leland, 561-438-3796
richard.leland@officedepot.com
or
Media:
Office
Depot
Brian Levine, 561-438-2895
brian.levine@officedepot.com