B Riley & Co's Scott Tilghman On Possibility Of Staples, Office Depot Merger: 'There's A Lot Of Cost-Savings To Be Had There'

Speaking about Starboard Value’s rumored interest in combining Staples, Inc. (NASDAQ: SPLS) and Office Depot Inc (NASDAQ: ODP), B Riley & Co Analyst Scott Tilghman said that without a doubt, putting two companies in a similar industry with a similar footprint together will drive economies of scale and therefore significant cost savings over time.

A merger would also allow the companies to better leverage distribution capacity and better rationalize retail store footprint, he explained, which means closing additional stores.

“You have duplicate infrastructures, so there’s a lot of cost savings to be had there,” he said. “The synergy targets could be pretty significant putting the two companies together, much more so than the roughly billion dollars we expect out of the Office Depot and OfficeMax merger.”

Tilghman expects to see possibly twice that amount, if not more, if Staples and Office Depot get together.