Dive Brief:

• Activist investor Starboard Value has sent a letter to Staples Inc. CEO Ronald Sargent urging a merger between the office-supplies retailer and its rival Office Depot.

• In its letter, Starboard said a merger would provide operating efficiencies and allow the combined company to better compete. Not pursuing a merger “would be a clear sign that significant leadership change is needed at Staples,” the letter said.

• Staples released a non-committal response, but is expected to reject the request, according to the Financial Times. 

Dive Insight:

Starboard has stakes in both retailers and until Tuesday’s public move has been urging a merger behind the scenes. Its letter sets things up for a proxy fight, something that Starboard has a habit of doing.

Several observers say that a Staples-Office Depot merger does make sense in the long run, although it may not be as feasible as it appears.