UPDATE: Janney Capital Markets Upgrades OfficeMax to Buy Awaiting FTC Approval of Merger with Office Depot

In a report published Thursday, Janney Capital Markets analyst David Strasser upgraded the rating on

from Neutral to Buy. In the report, Janney Capital Markets noted, “We are upgrading the shares of ODP and OMX to Buy from Neutral. The last obstacle to completion of their merger is the FTC approval, which should be done relatively soon. Once done, estimates are likely to increase rather dramatically as models begin to incorporate cost synergies from the merger. We believe the company's estimate of $400-600 million in synergies is reasonable, and incremental opportunities from store consolidation, which are not included in these estimates, provides somewhere between a cushion and upside to these estimates. We anticipate store closure synergies to be about $125 million based on our analysis of 300 overlapping stores within 2 miles of each other in key markets. There will be incremental operating costs, but we anticipate them to be modest relative to the magnitude of potential synergies. Part of these synergies will also be re-invested back in the business, particularly in the initial period to rebuild loyalty. Net/Net, we estimate about $450 million of net synergies from the merger, and a 2016 EBITDA of over $950 million. We acknowledge that near term results could see headwinds from the government shutdown, but we believe the market will overlook this near term issue, when provided with additional details.” OfficeMax closed on Wednesday at $12.31.