Activist investor Starboard Value wants to merge rival office-supply chains Staples and Office Depot, according to people familiar with the matter.
Filings revealed on Thursday that Starboard had taken a 5.1 percent stake in Staples and increased its existing holdings in Office Depot to about 10 percent. Including swap positions, the stake in Staples is about 6 percent.
Staples shares rose 8 percent in midday trade on the news while Office Depot was up 13 percent. Analysts and investors say a merger between the two companies could generate anywhere form $1.4 billion to $2 billion in synergies. By comparison, the two companies are expected to generate a combined $2 billion of earnings before interest, taxes, depreciation, and amortization in 2014, according to FactSet.
Starboard has been an investor in Office Depot since 2012, prior to its 2013 merger with OfficeMax. Starboard founder Jeff Smith was on the board of Office Depot at the time of the deal, though he has since stepped down.
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Analysts say the deal is less likely to raise eyebrows among antitrust regulators than it did back in 1997, when Staples and Office Depot contemplated a merger only to be blocked. Since then, online competition has increased dramatically while the likes of Wal-Mart and Target have moved aggressively into the office supply business.
In 2013, the Federal Trade Commission gave the Office Depot-OfficeMax deal clearance without requesting any divestitures. The decision acknowledged that the competitive environment had changed over the years as new competition emerged.
As a standalone company, Staples remains challenged. Sales in the year through January 2015 are expected to fall 5 percent and a similar amount the next year, according to FactSet.
In a statement, Staples said "we value shareholder input and dialogue and are focused oncreating shareholder value over the long term. Our top priority remains transforming Staples by accelerating growth in our commercial businesses,investing in our online capabilities and changing the way we work."
Starboard declined to comment and Office Depot didn't respond immediately to a request for comment.
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UDPATE: This story was updated to include a statement from Staples.