Office Depot Inc. announced that it signed a definitive merger agreement with OfficeMax Inc. in which the two companies would combine in an all-stock transaction. The combined entity expects annual cost synergies between $400 million and $600 million (which we estimate to be about 8%-12% of combined selling, general and administrative, and other operating expenses), which we believe is achievable over time, if not conservative. However, in the interim, both companies could face increased sales pressure from weak industry conditions and intense competition. We are affirming the ratings, including the 'B-' corporate credit rating, on Office Depot. The outlook remains stable. The stable outlook incorporates our expectation of lower sales over the near term at both entities and our view
