More consolidation likely in office supply space

Reported merger talks between Office Depot and OfficeMax sent shares in the office space sector higher on Tuesday (Feb.18) between the No. 2 and No. 3 firms. Office Depot shares rose more than 9% to $5.01, while OfficeMax stock posted a 20% gain trading at $12.99 at the noon hour.

Larger competitor Staples also particiated in the stock rally with shares soaring about 10% to $14.16 at midday on Tuesday.

The companies said they do not comment on rumors or speculation, but industry analysts told Investor Business Daily that if the merger were to take place, Office Depot and OfficeMax could ultimately close as much as 25% of their combined store base, possibly using the merger as a "catalyst" to incur extraordinary charges.

Staples would also be a winner if a merger were to occur. While the terms of the potential deal aren't yet known analysts estimate Staples' top-line stands to benefit by 2% in North America Retail and Delivery for a "minimum potential lift" of 10 cents a share.

Staples would also stand to pick up lost sales from store closings, analysts say.

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Office Depot has two locations in Northwest Arkansas -- Springdale and Rogers. OfficeMax has one location in Fayetteville while competitor Staples has one location in Rogers.

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