Activist investor Starboard Value LP is urging the CEO of Staples Inc. to merge with rival Office Depot.
The investor, which has about a 10 percent stake in Office Depot (Nasdaq: ODP) and about 5 percent in Staples, advises the company to take a look at retaining an investment bank and legal advisers to assist the board in evaluating, structuring and executing the transaction with Office Depot, according to the Sun Sentinel.
In a letter to Staples, released Tuesday, the activist says the cost cuts in a combination could more than double operating profits and that the two chains could be more efficient about closing stores when combined.
Framingham, Mass.-based Staples (Nasdaq: SPLS) didn't outright dismiss a potential merger, issuing a statement Tuesday that the company "values constructive shareholder input." Office Depot, on the other hand, declined to comment.
Starboard Value pushed Office Depot to merge with rival OfficeMax in 2013. The office supplies retailer has since been trying to consolidate and cut stores to save money. Starboard last year overthrew the leadership at Orlando-based Darden Restaurants, owner of Olive Garden and other restaurant chains.
Staples and Office Depot tried to merge in 1997, only to be blocked by regulators. But the industry has since changed dramatically.