Boise Casade buys OfficeMax
Boise Cascade announced that it will acquire the OfficeMax office supplies superstore chain for $1.115 billion. While Boise Cascade is by origin a wood and paper company, in recent years, all of its profits and a substantial portion of its income have come from the sale of office products. In fact with $3.6 billion in office supply sales in 2002, Boise Cascade is almost as big in that area as OfficeMax ($4.8 billion). The difference is that OfficeMax serves individuals and small business with its (around 1,000) retail outlets, while Boise Cascade sells directly to large businesses nationwide and in Australia, Canada, and New Zealand (over 40 offices).
For OfficeMax, it is a survival move. The company is far smaller than its rivals, Staple and Office Depot. The combined company will be more in the same league. Of course, all there are looking over their shoulder at Wal-Mart, which is growing fast in the office supplies area.
According to an article in the Houston Chronicle,
At least one analyst is skeptical that three office-supply megastores can survive.
Alex Paris, president of Barrington Research, noted that most specialty retail markets have only been able to support two megastore chains. “Look at drugstores,” he said. First, the industry lost independently owned ones. “Then they were bought up by three big chains — Rite Aid, Walgreens, and CVS. Now only Walgreens and CVS are doing well. And among mass merchandisers, Kmart is struggling just to stay afloat, leaving only Wal-Mart and Target.”
The article points out that consolidation has been going on for a long time. Ten years, ago, there were some 14 retail office supply chains. Now there are three. Office Max and Boise Cascade are trying to make sure that they aren't the next to go. [Oligopoly Watch]