Office Depot to buy rival OfficeMax in $1.2 billion deal

NEW YORK (CNNMoney) -- Office Depot announced a deal to buy smaller rival OfficeMax in an all-stock deal worth about $1.2 billion.

Details on the deal were limited. The companies said they expect to save $400 million to $600 million annually from the combination. But there were no estimates of staffing cuts or store closings.

The decision about what to call the combined company will be determined after a CEO is selected. The company will look at both current CEOs as well as outside candidates before deciding who will run the companies.

The deal is clearly an attempt for the two companies to compete with larger rival Staples.

Office Depot has 1,629 stores worldwide and 38,000 employees.

Office Max had 941 stores at the end of 2012, and 29,000 employees in 2011, the most recent year it has reported.

Staples operated 2,248 stores worldwide in 2011 and has 90,000 employees.

All the companies in this business have faced increased competition from online retailers such as Amazon.

According to Wednesday's release OfficeMax shareholders will 2.69 shares of Office Depot stock for each of their shares. That is only about a 4% premium, based on Tuesday's closing stock prices. But OfficeMax shares had closed up nearly 21% in Tuesday trading based on widespread reports of the deal. Office Depot shares had closed up 9%.

Both company's share prices were up in early trading Wednesday, raising the potential value of the deal. Staples shares are slightly lower.

The combination would come as mergers and acquisitions have picked up.

Just last week, US Airways announced a merger with American Airlines parent AMR. Warren Buffett's Berkshire Hathaway announced it was buying Heinz. And Comcast announced a $16.7 billion deal for the 49% of NBC Universal that was still owned byGeneral Electric.