Office Depot, OfficeMax in talks to merge; deal seen soon

NEW YORK, Tue Feb 19, 2013 — Office Depot Inc., the No.2 U.S. office supply retailer, is in advanced talks to merge with smaller rival OfficeMax Inc. and a deal could come as early as this week, a person familiar with the matter said on Monday.

Both companies, which trail industry leader Staples Inc., are under much pressure from investors to boost profitability as well as shareholder value, and a merger would help them to cut costs, close stores and boost their clout with suppliers.

The deal is expected to be structured as a stock-for-stock transaction, the person said, but the source also warned that the talks could still fall apart.

Office Depot has a market capitalization of $1.1 billion while OfficeMax has a market value of $932 million.

Analysts have long called for consolidation in what they see as a cluttered sector, in which sales crumbled during the global financial crisis. Office supply stores are also fighting a battle for relevance, with shoppers increasingly buying their paper, toner and technology online or at mass merchants.

Office Depot declined to comment on the news of a potential deal. Representatives for OfficeMax were not immediately available for comment. The news was first reported by the Wall Street Journal.

Neuberger Berman LLC, one of OfficeMax’s top investors and which has pressured the company to do more for shareholders, said it would support a merger with Office Depot Inc. depending on deal terms.

Fiat ups Chrysler stake by 5 percent in move towards merger

DETROIT ― Italy’s Fiat SpA has raised its stake in Chrysler Group LLC by 5 percent to 58.5 percent, meeting a final target set by the U.S. government as the two groups move closer to creating one of the world’s leading auto makers.

Fiat has managed Chrysler since a 2009 bailout deal with the U.S. government. It has paid a total of around $2 billion for its majority stake and agreed a number of conditions to be met before a full merger could take place.

Sergio Marchionne, CEO of both groups, has made Fiat one of Europe’s top turnaround stories and wants to elevate the company to a global player through Chrysler.

“The acquisition of a further 5 percent of Chrysler is a fundamental step in completion of the integration between our two groups,” Marchionne said in a statement on Thursday.

Chrysler and Fiat said they had formally committed to the U.S. Treasury Department to produce the 2013 Dodge Dart sedan at a Chrysler plant in Illinois, the last performance event of three agreed with Washington in 2009.

That commitment, along with proving late last month to the U.S. Environmental Protection Agency that the new Dart can achieve an unadjusted combined fuel economy of 40 miles per gallon, triggered the 5 percent ownership increase. The group had said it would reach the target by the end of 2011.

“There was no real new element today, they have jumped the first, the second and now the third fence,” a Paris-based analyst said.

The remaining 41.5 percent ownership of Chrysler remains with a healthcare trust, called VEBA, affiliated to the United Auto Workers union.

Marchionne told Reuters in December it was possible Chrysler would have an initial public stock offering in 2013 as the UAW seeks to cash out or reduce its shareholdings.

Icahn interested in merger between rivals Navistar, Oshkosh

DOWNERS GROVE, Ill. ― Billionaire investor Carl Icahn wants Navistar International Corp. to consider merging with rival Oshkosh Corp., though he has not yet made a formal proposal to either company, several people familiar with the situation said.

Icahn, who has amassed 10 percent stakes in each of the companies, is currently in discussions with Navistar about getting one or more seats on the board of the U.S. truck and engine maker, these people said.

Icahn reported his stake in Navistar last week and said at the time he has held talks with management to discuss its business strategies and will seek additional conversations.

A deal, however, is far from certain. It’s not clear whether either of the companies would be open to the idea and it remains to be seen how effective Icahn would be in getting what he wants at these companies.

Shares of Oshkosh, which have nearly halved this year as the company struggles with a declining defense business and an expensive 2006 acquisition of JLG Industries, jumped 6.6 percent to $19.61 on the New York Stock Exchange on Friday, valuing the firm at nearly $1.8 billion.

Navistar shares rose 3.6 percent to $41.53 in early trading, valuing the company at about $3 billion. The stock has fallen some 30 percent this year.

A Navistar-Oshkosh combination has long been talked about as a possibility in the industry as the two companies can wring out costs and excess capacity. There are also some complementary units such as Navistar’s finance and engine making businesses that could benefit from a merger.

Oshkosh investors have been concerned about the company’s exposure to defense contracts due to government-spending cutbacks and increased competition, including the threat posed by Navistar’s own plan to grow in the sector.

Tying up with another player in the heavy-vehicle industry could protect Oshkosh from a secular downturn in the defense sector that many analysts are predicting.

Icahn did not return a request for comment. Oshkosh declined to comment on relationships with Icahn and other shareholders.

A Navistar spokesperson referred to remarks its chief executive Dan Ustian made in an interview with Fox Business on Tuesday. In that interview, Ustian said Icahn “is into (Navistar) to make some money … We have to deliver to him and all our other investors.”

USA Truck snubs larger rival Celadon Group on merger talks

INDIANAPOLIS ― USA Truck Inc refused to meet with larger rival Celadon Group to discuss a possible merger even as it reported a quarterly loss and announced a host of restructuring actions.

Earlier this month, Celadon reported a 6.29 percent stake in USA Truck and requested a meeting with the target company’s management to discuss a possible association.

In a statement on Friday, USA Truck said its board declined to meet with Celadon executives after considering recent management changes and the board’s desire to remain focused on increasing value through operational improvements.

Celadon Chief Executive Steve Russell told Reuters he was surprised by USA Truck’s decision and that his company will evaluate what to do next.

He declined to comment on whether the company would go directly to shareholders with an offer.

The top two shareholders of USA Truck are insiders Robert Powell and James Speed, who own about 10 percent each.

Powell and Speed were part of an investment group that bought USA Truck in the late 1980s from its then-parent Arkansas Best Corp.

USA Truck posted a third-quarter loss, hurt by soft freight volumes and a high number of unmanned tractors.

“Our business environment was softer than in the second quarter,” said its CEO Cliff Beckham. “We felt a modest step-down in overall freight demand in our markets, which we attribute to slower growth in the U.S. economy.”

The trucking company had warned of a weak third quarter late August, which prompted a sharp fall in its stock price.

The decline in USA Truck’s stock value was one of the reasons cited by Celadon when it expressed an interest in buying the company. It bought USA Truck shares at about 55 percent of USA Truck’s book value per share.

USA Truck, which has operations in the United States, Mexico and Canada, said it reduced its fleet size by 49 tractors on a low utilization rate.

The Arkansas-based company cuts its expected tractor purchases for the second half of 2011 to 155 from 250.

It has also reduced its executive management team to five members from nine at the beginning of the second quarter.

USA Truck shares fell as much as 6 percent to $7.38 on Friday on Nasdaq. Celadon rose 4 percent to $10.78.

Sprint offers AT&T spectrum solution to FCC without merger

WASHINGTON ― AT&T Inc. could greatly expand its network capacity for a fraction of the cost it plans to shell out to buy T-Mobile USA, Sprint Nextel said Monday.

Sprint, a vocal opponent of the deal, said it would present the Federal Communications Commission with a technical analysis detailing the actions AT&T could take to improve its network without acquiring T-Mobile USA.

The proposed merger, which requires FCC and Department of Justice approval, would concentrate 80 percent of U.S. wireless contract customers in just two companies ― AT&T/T-Mobile and Verizon Wireless.

Sprint said its filing to the FCC will assert that AT&T could forgo the T-Mobile takeover and increase its network capacity by more than 600 percent by 2015 by simply putting its current resources to better, more efficient use.

AT&T argues that it needs the spectrum of Deutsche Telekom AG’s T-Mobile USA to expand high-speed services faster and improve its network performance, criticized by consumers for dropped calls and slow data speeds.

Sprint, considered the carrier with the most to lose from the AT&T deal, as it would put it in a distant third place in the U.S. market, called this rationale unfounded.

“AT&T could increase its capacity by developing its warehoused spectrum, accelerating its 4G network buildout, and implementing a more efficient network architecture,” Sprint said in a statement.

A 600 percent boost in capacity could handle AT&T’s projected data demands and would cost far less than the $39 billion AT&T would spend to take over T-Mobile, Sprint said.

An AT&T spokesman responded by criticizing Sprint’s transfer of its network management to Ericsson. “A company that has outsourced the management of its own network shouldn’t be giving advice to others.”

The public interest group Public Knowledge also said on Monday it would file a preliminary economic and technical report questioning both AT&T’s spectrum constraint claims and T-Mobile USA’s financial hardships.

“The report argues both companies have many options to increasing their high-speed data networks,” a spokesman for the group said in a statement.