Boise Cascade to Buy OfficeMax

Paper products manufacturer and office supplies marketer Boise Cascade Corp. (NYSE: BCC) announced on July 14 that it has agreed to buy office supplies retailer/cataloger OfficeMax (OMX) for nearly $1.2 billion in cash and stock. The deal, which is expected to close during the fourth quarter, will give the Cleveland-based Boise an office supplies retail chain, and expand its catalog/Internet business, effectively more than doubling the size of Boise’s office products distribution business.

Boise Cascade will pay $9 a share for OfficeMax, a 25% premium over OfficeMax’s closing price of $7.18 a share on Friday. Boise Cascade will pay 30% of the price in cash and 70% in stock. The cash amount will increase if the value of Boise Cascade shares drop.

According to a joint announcement by the two companies, the deal has already been unanimously approved by both boards of directors. It’s now subject to customary approvals under antitrust laws and by the two companies’ shareholders.

“Over the next several months we will be reviewing all aspects of the business, how they work and how they will work together,” says Boise spokesperson Ralph Poore. Before the deal closes, Poore says, “the businesses will remain the same and conduct business as they have been. No decisions have been made” beyond that.

In assessing the deal, Boise chairman/CEO George Harad said in a statement that OfficeMax’s improved productivity and margins in its operations appealed most to Boise, in addition to OfficeMax’s strong same-store sales gains and new store formats. “OfficeMax’s proven retail expertise and powerful brand complement Boise Office Solutions’ exceptional strength in the contract customer segment and our strong commitment to customer service supported by leading-edge technology,” Harad said.

As for OfficeMax, the deal “gives the newly formulated organization the ability to better serve all channels of the office products market from home offices to small businesses to large corporations,” OfficeMax cofounder/chairman/CEO Michael Feuer said in a statement. The combined company “will be strategically and financially stronger and rival the size of its closest competitors.”

The $7.4 billion Boise, whose $2.76 billion catalog/Internet sales place it 10th in the 2003 Catalog Age 100, is eyeing rivals Office Depot and Staples, who rank sixth and seventh respectively on the Catalog Age 100 chart. Boise lost $27.5 million or 53 cents a share in the first quarter, as its stock has fallen 7% this year. On the other hand, shares of the $4.77 billion OfficeMax have jumped by 44%.

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