Office supply retailer Staples is buying competitor Office Depot.

The combined company will include over 2,000 retail stores in 57 countries generating approximately $US17 billion in annual sales.

Staples will pay Office Depot shareholders with a combination of cash and stock, valuing Office Depot at $US6.3 billion or around $US11.00 per share.

Office Depot closed on Tuesday at $US9.28 per share.

“This is a transformational acquisition which enables Staples to provide more value to customers, and more effectively compete in a rapidly evolving competitive environment,” Staples CEO Ron Sargent said. “We expect to recognise at least $US1 billion of synergies as we aggressively reduce global expenses and optimise our retail footprint. These savings will dramatically accelerate our strategic reinvention which is focused on driving growth in our delivery businesses and in categories beyond office supplies.”

Management expects the $US1 billion in annualized cost savings to be recognised three years after the deal closes.

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