Shares of Office Depot (NYSE:ODP) and Office Max (NYSE:OMX) soared in pre-market trading on Tuesday after the unnamed sources told the Wall Street Journal that the two office supply retailers were discussing a possible merger.
Investors liked the news, sending Office Max shares up more than 20%, while Office Depot shares rocketed almost 30% before the market’s open.
Terms of a potential deal remained unclear, though it would likely be an all stock transaction. Office Max and Office Depot generate about $7 billion and $11.5 billion, respectively, in annual revenue. Office Depot operates 1,675 stores, compared to 900 for Office Max.
Both chains have suffered from a weak economy and competition with other big box retailers including Costco (NASDAQ:COST) and Wal-Mart (NYSE:WMT) in recent years. Their primary segment competitor is Staples (NASDAQ:SPLS).
Last year, Office Depot approved a “poison pill” defense against a hostile takeover after Starboard Value, a hedge fund, acquired a significant stake in the company.