NOTE 2. MERGER, ACQUISITION, AND DISPOSITIONS

Merger

On November 5, 2013, the Company completed its merger of equals transaction with OfficeMax. In connection with the Merger, each former share of OfficeMax common stock, par value $2.50 per share, issued and outstanding immediately prior to the effective time of the Merger was converted to 2.69 shares of Office Depot common stock. The Company issued approximately 240 million shares of Office Depot, Inc. common stock to former holders of OfficeMax common stock, representing approximately 45% of the approximately 530 million total shares of Company common stock outstanding on the Merger date. Additionally, OfficeMax employee stock options and restricted stock were converted into mirror awards exercisable or earned in Office Depot, Inc. common stock. The value of these awards was apportioned between total Merger consideration and unearned compensation and is being recognized over the remaining original vesting periods of the awards. The consideration transferred in this all stock transaction amounted to approximately $1.4 billion.

Office Depot was determined to be the accounting acquirer. In this all-stock transaction only Office Depot common stock was transferred, the Office Depot shareholders received approximately 55% of the voting interest of the combined company and other factors were equally shared between the two former companies, including representation on the combined entity’s Board of Directors, or were further indicators of the Company being the accounting acquirer.

Like Office Depot, OfficeMax was a leader in both business-to-business and retail office products distribution. OfficeMax had operations in the U.S., Canada, Mexico, Australia, New Zealand, the U.S. Virgin Islands and Puerto Rico. The Merger was intended to create a more efficient global provider of these products and services that is better able to compete in a changing office supply industry. OfficeMax’s results since the Merger date are included in the Consolidated Statements of Operations.

Merger and integration costs are accounted for as expenses in the period in which the costs are incurred. Transaction-related expenses are included in the Merger, restructuring, and other operating expenses, net line in the Consolidated Statements of Operations. Refer to Note 3 for additional information about the costs incurred and Note 9 for discussion of the income tax impacts of the Merger.

Acquisition

During the first quarter of 2015, the Company acquired an interior furniture business for $9 million. The business supports the contract channel of the North American Business Solutions Division. Fair value of assets acquired and liabilities assumed are included in the balance sheet since acquisition and include certain amortizing intangible assets and tax-deductible goodwill. Supplemental pro forma financial information is not provided based on materiality considerations.

Dispositions

Grupo OfficeMax

In August 2014, the Company completed the sale of its 51% capital stock interest in Grupo OfficeMax, the former OfficeMax business in Mexico, to its joint venture partner for net cash proceeds of $43 million. The loss associated with the disposed business amounted to $2 million, which resulted primarily from the release of the net foreign currency remeasurement differences from investment to the disposition date recorded in other comprehensive income (cumulative translation adjustment) and fees incurred to complete the transaction. The loss on disposition is included in Merger, restructuring, and other operating expenses, net in the Consolidated Statements of Operations. This disposition did not have a major effect on the Company’s operations and financial results and, therefore, is not presented as discontinued operations.

The amounts included in the 2014 Consolidated Statements of Operations for this business through the date of sale are as follows:


(In millions)
Sales	$	155
Income before income taxes		6
Income attributable to Office Depot, before income taxes		4

Office Depot de Mexico

From 1994 through the third quarter of 2013, the Company participated in a joint venture that sold office products and services in Mexico and Central and South America. In the third quarter of 2013, the Company sold its 50 percent investment in Office Depot de Mexico, S.A. de C.V. (“Office Depot de Mexico”) to its joint venture partner, Grupo Gigante, S.A.B. de C.V. (“Grupo Gigante”). The transaction generated cash proceeds of the Mexican Peso amount of 8,777 million in cash ($680 million at then-current exchange rates). A pretax gain of $382 million was recognized in 2013 as Gain on the disposition of joint venture in Other income (expense) in the Consolidated Statements of Operations. The gain is net of third party fees, as well as recognition of $39 million of cumulative translation losses released from Other comprehensive income because the subsidiary holding the joint venture investment was substantially liquidated following the disposition. The investment in this joint venture was accounted for under the equity method of accounting. For periods prior to the sale, the Company’s proportionate share of Office Depot de Mexico’s net income is presented in Other income (expense), net in the Consolidated Statements of Operations and totaled $13 million through the date of sale in 2013.