NEW YORK ( TheStreet) -- After reports over the weekend indicating Office Depot ( ODP) and OfficeMax ( OMX) are about to announce a merger, investors and analysts appear to be saying: "Finally."

A potential merger could help alleviate the operating struggles of big-box office retailers OfficeMax, Office Depot and Staples ( SPLS), amid overexpansion and a change in the marketplace with the rise of smaller suppliers such as W.B. Mason and new entrants as big as Wal-Mart ( WMT), Costco ( COST) and Amazon ( AMZN).

"It's about damn time," Oppenheimer retail analyst Brian Nagel said, quoting basketball star LeBron James, in a note to clients evaluating a proposed merger.

"An Office Depot and OfficeMax combination would spur a rationalization of excessive office products retailing real estate and render the sector more capable of managing through a challenged product cycle and competing with new entrants such as," Nagel said.

Investors in Office Depot, OfficeMax and Staples are taking the merger speculation of the industry's number two and three leading players as a positive sign for office suppliers.

Shares of Office Depot ( ODP) and OfficeMax ( OMX) spiked in trading Tuesday on the reports of advanced merger talks. Office Depot surged over 9% to $5.02, while OfficeMax climbed over 20% to $13. Staples, which could be a beneficiary of a deal, rose over 13% to $14.65.

The key to a potential merger and an improving outlook for all players involved centers on store closings, operating synergies and asset disposals, according to industry analysts. Meanwhile, the work of activist funds such as Starboard Value, Office Depot's largest shareholder, may have helped to put companies in a position to try a merger.

"We believe that a merger has made sense for years and that the recent monetization of key assets provides the necessary cash flow to pay for the integration costs," Gary Balter of Credit Suisse wrote in a note to clients that cites OfficeMax, Office Depot and Staples.

"The synergies will not include higher pricing given the Internet and other pressures, but fewer store locations fighting for sales, lower distribution costs for OMX and ODP, and potential share gains by Staples during the near-term disruption of integrating two disparate systems."

Already, Office Depot is in the process of implementing a three-year plan to cut costs that the company projects will add $300 million to its earnings before interest and taxes. Those expense reductions, and between $480 million to $580 million in merger-related savings, could mean that the merged company could see over $700 million in synergies, according to calculations by Daniel Binder of Jefferies.

"With Office Depot and OfficeMax having closed numerous stores in recent years, plus a potential $1 million to $2 million cash cost to close additional stores, we suspect a lot of the future closing opportunities will come as leases come up for renewal," Binder wrote in a note to clients that forecasts roughly 52% of Office Depot's stores overlap with those of OfficeMax.

Were the merged entity to close or discontinue those stores, Binder calculates Staples could gain up to 30% of those sales, or up to $60 million in revenue annually.

While details of the potential merger, first reported by The Wall Street Journal, haven't been disclosed, Bloomberg reported that a deal is possible this week.

It remains unclear whether OfficeMax or Office Depot would be the acquirer in a potential merger.

Deutsche Bank analyst Mike Baker forecasts that if OfficeMax were the acquirer, it could see a boost to earnings per share of 22 cents. "Although we think the more likely deal is OfficeMax buying Office Depot, if ODP were to buy OMX in an all-stock deal, it would be more accretive," wrote Baker, who calculates a 30 cent EPS boost for Office Depot.

To help pay for the deal, Office Depot may also need to dispose of a joint venture in Mexico.

One twist to a potential deal comes from antitrust authorities such as the Federal Trade Commission and Department of Justice.

In 1997, the FTC's head, William Baer, opposed a merger proposal between Office Depot and Staples, citing the prospect of anti-consumer effects such as rising prices. Baer, who now heads the DoJ's antitrust division, is likely to play a key role in evaluating any proposed merger.

Still, the struggles of OfficeMax and Office Depot in recent years may indicate a changed office-supplies marketplace that could push a deal forward.

"The competitive landscape within the office-products retail channel has dramatically changed since the FTC nixed the proposed 1997 merger between Staples and Office Depot," Jefferies' Binder wrote.

"The rise of large players in the Internet retail channel and the entrance of club and mass channel to the office product market resulted in a significant increase in price transparency and competition," he added, while noting that Wal-Mart and Amazon have undercut prices up to 10% in some instances.

Shares of Office Depot, which has been struggling to compete with larger rival Staples, plunged 67% over the past five years prior to Tuesday trading.

Office Depot and OfficeMax declined to comment when contacted by TheStreet.

Starboard Value, the Office Depot shareholder, didn't immediately return a call seeking comment.

-- Written by Antoine Gara in New York

For more on M&A speculation, see Morningstar's 11 M&A stock picks for 2013.

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