Worcester Business Journal

4 Worcester Business Journal • February 16, 2015 www.wbjournal.com Framingham-based Staples Inc. announced Feb. 3 that it was purchasing its chief rival, Office Depot, for $6.3 billion. The deal will merge the nation's top remaining office supply chains, leading to cost savings of $1 billion annually within three years, according to Staples. (For more, read our editorial on Page 29.) What will the new Staples look like? The deal would grow Staples from $22.7 billion in annual revenue to $39 billion while the numbers of stores and distribution facilities double to 4,020 and 243, respectively. The company's international pres- ence would grow overall, but at $7.4 billion will make up about the same percentage of the business as it does today. What's the timetable for the merger? It's expected to be completed by the end of the year, according to Staples. The deal is subject to the ap- proval of regulators and shareholders of Office Depot, which is based in Boca Raton, Fla. What led to the deal? Talks between the two companies began in September, according to Staples. The company had been under pressure to merge with its rival from activist investor Starboard Value, which has a stake in both firms. In a letter to Staples CEO Ron Sargent, Starboard Value said a merger could help Staples com- pete against larger retailers and online competitors. How will this help the company? Sargent, who will remain CEO, said the projected savings "will dramatically accelerate our strategic rein- vention which is focused on driving growth in our delivery businesses and in categories beyond office supplies." In recent years, Staples has been gradually reducing its retail store space and focusing more on online sales. Are there any skeptics? Yes. Even if the deal passes antitrust scrutiny, it still spells bad news for smaller, regional competitors, said retail analyst Frank Riso, which would mean less com- petition overall and a worse deal for consumers. Others in the industry question the long-term via- bility of the Staples model. One, Doug Stephens of Retail Prophet, a retail consultancy in Toronto, told CBC News that an increasingly paperless work envi- ronment and the addition of online avenues for sup- plies could spell the end of the brick-and-mortar sup- ply store. He also felt Staples would likely move toward more online sales, which would result in store closing and layoffs. n WORCESTER — The American Hockey League made it official: The Worcester Sharks are relocating to San Jose, Calif. The Sharks, an affiliate of the San Jose Sharks of the National Hockey League, are leaving to become part of a new Pacific division, along with four other AHL franchises. The Sharks began play in Worcester in 2006, after the Worcester Ice Cats left the city in 2004. The Sharks won a division title in the 2009-10 season. ACTON — Employment drug testing company Psychemedics Corp. boost- ed revenue in fiscal 2014 by 9 percent on "strong new business growth," but not necessarily because companies are hiring at a greater clip, CEO Raymond Kubacki said in an earnings statement. "New business has accounted for our entire gain, as well as offset softness in the jobs market … the largest category of gains have been in temporary help," Kubacki said. For the year, Psychemedics reported revenue of $29.2 million, up from $26.9 million in the previous year. For the quarter, revenue totaled $6.8 million, up from $6.5 million in the fourth quarter of 2013. WORCESTER — UMass Medical School in Worcester will collaborate with Lysogene, a French biotechnolo- gy company, and Auburn University in Alabama, to develop pre-clinical studies of a rare disorder that causes neurological impairment, Lysogene announced. The two schools will use gene therapy technology to develop studies of GM1-gangliosidosis, an inherited disorder that causes severe neurological impairment. OXFORD — IPG Photonics expects fourth-quarter 2014 revenue and earnings per share to finish ahead of its expectations, the fiber-laser manu- facturer said. IPG said it expects to report revenue of about $207 million when it releases its fourth-quarter numbers on Feb. 20. Its previous guid- ance expected revenue to fall between $190 million and $205 million, the company said. Meanwhile, it forecasts earnings per share in the range of $1.06 to $1.07, up from the original forecast range of 86 cents to $1.01. CEO Valentin Gapontsev said IPG expects a 25-percent jump in those key numbers for the quarter, com- pared with the fourth quarter of 2013. WORCESTER — Worcester Polytechnic Institute is expanding its reach in Panama and offering more learning experiences for its students in the Central American republic, the school announced. WPI students already play a key role in the refur- bishment of the Panama Canal through WPI's Panama Project Center, the school said in a statement. Established in 2010, the center is one of more than 40 around the world that offer WPI students hands-on project opportunities. ATHOL — Toolmaker L.S. Starrett recorded net income of $2.4 million, or 35 cents per share, in the second quarter of its 2015 fiscal year, the com- pany announced. The figures compare favorably to net income of $1.8 mil- lion, or 26 cents per share, for the same period — October through December — a year earlier. Starrett said the improved performance was primarily the result of increased reve- nue; and improved gross margins that offset higher selling, general and administrative expenses and a higher effective tax rate. Starrett said it expe- rienced strong revenue gains in North America and continued gains in China for the quarter. WORCESTER — Hanover Insurance Group reported a profit of $89.9 mil- lion for the fourth quarter, ending what president and CEO Frederick H. Eppinger called "a strong year." In a statement on its quarterly earnings, Hanover's profit amounted to $2 per share, compared with $1.57 for the fourth quarter of 2013, when net income totaled $70.1 million. Operating income for the fourth quar- ter, which ended Dec. 31, was $79.6 million, or $1.77 per share. Analysts surveyed by Zacks Investment Research had expected earnings of $1.47 per share. The results also com- pared favorably with Hanover's 2013 fourth quarter, when operating income was $59.6 million and net earnings $1.33 per share. WESTBOROUGH — Business con- sulting and technology outsourcing company Virtusa Corp. reported another three months of double-digit percentage gains in revenue and net income for the third quarter of its 2015 fiscal year. In its quarterly report, Virtusa said revenue grew 22 percent, to $123 million, over the third quarter of the 2014 fiscal cycle. Meanwhile, its net income, $11.8 million (41 cents per share), marked a jump of more than 26 percent. Operating income for the quarter grew only 20 percent. DEVENS — AMSC continued to lose money in the most recent fiscal quar- ter that ended Dec. 31, despite increas- ing revenue over the previous year. The manufacturer of energy technol- ogy reported $21.3 million in third- quarter revenue, up from $20.6 mil- lion in the third quarter of 2013. The REGIONAL BRIEFS >> Continued on next page Verbatim " … It will take a comprehensive approach to effec- tively tackle the situ- ation. Massachusetts hospitals, health systems and affiliated physician prac- tices have a crucial leadership role to play in helping to find and implement solutions." Massachusetts Hospital Association President and CEO Lynn Nicholas, on the MHA's new opioid prescription management policy released earlier this month, aimed at curbing the misuse of opioid prescriptions. Source: Massachusetts Hospital Association, Feb. 5 >> "Let's be very clear here; this is a very initial stage of the process. Nothing is going to happen overnight." Worcester Mayor Joseph Petty, on discus- sions about whether to renovate or rebuild South High Community School, which is plagued by noise problems. Source: Telegram & Gazette, Feb. 9 >> "Once it stops snowing, we plan to have a long conver- sation with the folks at the T about improving perfor- mance." Gov. Charlie Baker, on MBTA service disrup- tions on Feb. 9 and 10, following three weeks of major snowstorms. Source: Boston.com, Feb. 9 >> BRIEFING: STAPLES AND OFFICE DEPOT CENTRALMASS In Review

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