Naper-based OfficeMax announces merger
By Susan Frick Carlman firstname.lastname@example.org February 20, 2013 3:06PM
Office Max headquarters at 263 Shuman Boulevard in Naperville on Thursday, February 21, 2013. Office Max and Office Depot are merging. | Steven Buyansky~Sun-Times Media
Updated: March 23, 2013 6:15AM
Naperville won’t take a direct economic hit if OfficeMax pulls up its corporate stakes and heads south as part of its merger with Office Depot, officials said.
That’s partly because initial expectations of some $1 million in annual revenue for the city, projected when the company relocated its corporate home to Naperville in 2006, did not materialize. Terms of a deal struck with OfficeMax called for the city to retain the first $500,000 of those sales tax receipts and rebate the rest to the company each year until it had paid some $6.5 million in offered incentives.
“We created and entered into an incentive package with OfficeMax, with the hopes that they would move their Internet sales processing center here to Naperville. They elected not to,” said Doug Krieger, city manager, who said that piece of the business remained in Itasca.
An OfficeMax exodus could, however, mean an uptick in local joblessness. The company’s Shuman Boulevard offices, formerly occupied by Lucent Technologies, is the workplace for some 1,500 people. OfficeMax inked an 11-year lease on the office space in late 2005.
There also could be peripheral pain if the building again is emptied out. The site has a higher appraised value when occupied than if it sits vacant, Krieger noted.
It was not known whether the $1.2 billion consolidation — designed to bolster the two companies’ ability to compete with current industry leader Staples — will necessarily entail another move for the Naperville workers.
“We are not altogether convinced that it makes sense for the consolidation to be made in Boca Raton at Office Depot’s headquarters. We realize they’re larger but we certainly have a more centralized presence here than the coast of Florida,” Krieger said. “We’re absolutely hopeful that they will retain a presence here.”
He admitted that in terms of climate alone, it would be a hard sell. The sun was shining in both cities Wednesday afternoon, but in Naperville the mercury was struggling to reach the mid-20s, while in Boca Raton, the temperature was a pleasant 78 degrees.
“But we’re doing our best,” Krieger said.
A big deal
Office Depot and OfficeMax announced their long-awaited merger Wednesday in a $1.2 billion all-stock deal, but the news came out earlier than planned and without critical details, such as who would lead the company and where it would be based.
Experts say the omissions are unfortunate and highly unusual.
“I cannot remember another merger where these announcements (about the CEO, headquarters and other details) were not made,” said Darren Hensley, a partner at the Polsinelli Shughart law firm in Denver with more than 20 years’ experience in representing companies in mergers and acquisitions.
David Arenas, managing director with executive search firm Reilly Partners in Chicago, said the way the announcement unfolded “raises a lot of questions” when the companies should be providing “confidence, certainty and good information” to investors.
“Why is there a search committee (to find a new CEO)?” he asked. “What is the rationale? In what direction is the combined entity moving? It doesn’t seem it was well-orchestrated or well-prepared.”
The search committee, composed of equal numbers of board members from each company, will consider outside candidates as well as Office Depot CEO Neil Austrian and OfficeMax CEO Ravi Saligram. It will announce its CEO pick after the merger wins regulators’ approval.
Analysts listening to the companies’ conference call Wednesday didn’t challenge the companies’ description of a merger of equals that will create an office supply giant. with $18 billion a year in sales — still smaller than major rival Staples and challenged by a shrinking market.