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OfficeMax, Office Depot Near All-Stock Merger: Sources

Office supply retailers Office Max and Office Depot are near a merger that could be announced this week, according to people familiar with the matter.

As of Monday night, the two companies and their advisers were still working toward a price for the deal, expected to be all-stock and originally set to be announced later in the week, one of the people said. However, the announcement could get moved up, given heightened media attention after news of the talks was reported by The Wall Street Journal on Monday, a stock market holiday, two of these people said.

(Read More: We Know M&A's Back—But Where's It Going Next?)

Representatives for Office Depot could not be reached for comment. A spokesperson for Office Max said it is the company's policy not to comment on market rumors or speculation.

JPMorgan is advising Office Max, while Morgan Stanley and boutique Peter J. Solomon are advising Office Depot, according to people familiar with the talks. Office Depot hired Morgan Stanley after activist Starboard Value bought a nearly 15% stake in the struggling retailer in September.

At the time, Starboard identified Office Depot's 50% stake in its Mexican unit, Office Depot de Mexico, as a non-core asset that the company could monetize. Grupo Gigante, which owns the other half of the Mexico joint venture, is in discussions to purchase the remaining stake as Office Depot gets sold, two of the people said.

(Read More: Why a Wave of European Deals Could Be Next)

The merger would combine the country's second- and third-largest office supply retailers, an aim to create a formidable competitor to Staples Inc., currently the industry leader by a wide margin. Staples' dominance in the sector is said to allay concerns that the tie-up would be held up by antitrust obstacles.

An attempted deal between Staples and Office Depot was held up by regulators in 1997 on fears the merger would lead to higher prices for consumers and small businesses for frequently purchased items such as notebooks and highlighters.

Staples could not be reached Monday evening for comment.

(Read More: AMR Creditors Approve $11 Billion Merger With US Air)

JPMorgan is advising Office Max, while Morgan Stanley and boutique Peter J. Solomon are advising Office Depot, according to people familiar with the talks. Office Depot hired Morgan Stanley after activist Starboard Value bought a nearly 15% stake in the struggling retailer in September.

At the time, Starboard identified Office Depot's 50% stake in its Mexican unit, Office Depot de Mexico, as a non-core asset that the company could monetize. Grupo Gigante, which owns the other half of the Mexico joint venture, is in discussions to purchase the remaining stake as Office Depot gets sold, two of the people said.

(Read More: Why a Wave of European Deals Could Be Next)

The merger would combine the country's second- and third-largest office supply retailers, an aim to create a formidable competitor to Staples Inc., currently the industry leader by a wide margin. Staples' dominance in the sector is said to allay concerns that the tie-up would be held up by antitrust obstacles.

An attempted deal between Staples and Office Depot was held up by regulators in 1997 on fears the merger would lead to higher prices for consumers and small businesses for frequently purchased items such as notebooks and highlighters.

Staples could not be reached Monday evening for comment.

(Read More: AMR Creditors Approve $11 Billion Merger With US Air)

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