This post is in partnership with Fortune, which offers the latest business and finance news. Read the article below originally published at Fortune.com.
By Phil Wahba
It was just a suggestion, but one that investors in Staples and Office Depot seemed to have loved: the two struggling office supplies giants should merge.
Shares in both companies soared on Tuesday after Credit Suisse in a research note recommended they combine forces to better compete against Amazon.com and Wal-Mart Stores and stop declining sales at both.
Credit Suisse analyst Gary Balter estimated that by streamlining their operations, the companies together could save $1.44 billion a year, effectively doubling their combined operating profit by 2017. What’s more, a merged entity would be more strategic about store closings: both Staples and Office Depot are cutting stores by the dozen but often keeping a store that is unprofitable not to give up market share to its rival. That would mean that under a combination, only the best stores would remain.
A merger “makes significant financial and operational sense,” Balter wrote.
Regardless of whether they take Balter’s suggestions, it’s undeniable that both chains need to pick up their game.
For the rest of the story, please go to Fortune.com.
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