Stuck in the middle
Wednesday, Nov 6, 2013 - Posted by Rich Miller
* The merger between Illinois-based OfficeMax and Florida-based Office Depot is wrapping up…
As anticipated, the merger between OfficeMax and Office Depot was finally completed yesterday, the same day both companies announced their last financial results as independent entities.
The new company will use the name Office Depot Inc and will trade on the New York Stock Exchange under the symbol ODP. A new CEO has as yet been named. In the interim, Office Depot Chairman/CEO Neil Austrian and OfficeMax President/Ravi Saligram will serve together as co-CEOs. Until a permanent CEO is appointed and a new HQ location chosen, the company will also continue to operate in both Florida and Illinois.
* OfficeMax’s CEO said in September that he was taking himself out of the running for CEO of the merged company. Why is that important? Because he may not be able to effectively fight to locate the merged HQ in Illinois. Crain’s has more…
The new headquarters location is similarly uncertain.
But based on size, OfficeMax loses. Office Depot has 1,104 stores in the U.S. compared with OfficeMax’s 828. Office Depot reported 2012 sales of $10.7 billion and employs about 38,000. Office Max had $6.9 billion in 2012 sales and employs about 29,000 people. Office Depot occupies a 625,000-square-foot campus in Boca Raton, Fla., that was constructed in 2007, while OfficeMax’s headquarters, built in 2006, are 361,000 square feet.
“Office Depot is the bigger company, which might signal something, but it’s really very much up in the air,” Mr. Feng said. “At the end of the day, both companies are going to take a look at which location is less disruptive, which location requires fewer people to move and which location might offer better incentives.” […]
Last month, Mr. Saligram asked Illinois lawmakers to allow OfficeMax to keep employees’ state tax withholdings for 10 to 15 years if the merged company retained a headquarters in Naperville. He didn’t disclose the actual amount sought. Mr. Saligram said the company would retain 2,050 jobs, create 200 more and spend $150 million in Illinois on building leases.
In June, state Sen. Thomas Cullerton, D-Villa Park, introduced a bill worth roughly $30 million in tax credits over a decade if OfficeMax kept a non-retail workforce of 2,000 and makes a $150 million capital investment in the state.
So, essentially we’re stuck in the middle of an intra-corporate battle that will also pit Illinois against Florida.
- PoolGuy - Wednesday, Nov 6, 13 @ 10:58 am:
hopefully a Rick Perry sucking sound won’t enter the fray
- Downstater - Wednesday, Nov 6, 13 @ 11:09 am:
Sunshine, warm weather, and no state income tax in Florida. Plus Disney World.
- wordslinger - Wednesday, Nov 6, 13 @ 11:48 am:
Another day, another corporate shakedown. The great free-market capitalists, with their hands out.
- Ruby - Wednesday, Nov 6, 13 @ 5:27 pm:
Hurricanes and a high foreclosure rate. Florida posted the highest foreclosure rate in the nation in 2012, eclipsing Nevada for the first time.
- Midway Gardens - Wednesday, Nov 6, 13 @ 5:58 pm:
Ruby - Cheap housing is in FL favor then. Tornados in Naperville and no hurricanes have landed in FL in 8 years. Maybe they are due.
The Boca Raton site is very important to that area and FL as it’s one of the few Fortune 500 companies. FL is also in much better financial shape than IL and more likely to be able to afford meaningful state and county incentives. The Hertz package went through without a ripple for their Naples relocation. There would be a lot more noise in IL.
Though Boca is by large airports (FLL and MIA), the transportation advantage to visiting those 2K stores would seem to go to IL.
They might do a hybrid of centralizing some functions in one location vs the other. For example if they are going to start adopting Office Depot’s computer systems, then keeping IT in Office Depot’s home office would make sense. They might be able to get incentives from both states depending on the level of jobs even if only one is the official HQ.
People are going to be making the decisions based on what criteria are important to the company but some personal bias is likely to come in. Even if the company gets some tax breaks, the new CEO is going to have to be thinking about IL tax situation and dim outlook. And if he or she is a golfer, it’s Boca.