revealed yesterday they plan to join forces.

The two have agreed to consolidate under one company, Staples Holdings Ltd.

(SHL), with a view to merge.

SHL will acquire the entire share capital of privately-held Staples and about 95 percent of the share capital of publicly-listed Chips.

The Bank of Bermuda intends to announce a public offering with prospectus for SHL, a company in the process of formation, in April.

"The office products and supplies market is evolving at a fast pace both from a product and distribution viewpoint. The business community in Bermuda continues to grow and demands state of the art office equipment and reliable service,'' said Mr. William Midon, chairman of Staples Ltd.

"The consolidated business will have greater purchasing and importation economies, economies which can be channelled into the development and promotion of new products and product niches. The emergence of the home office concept adds another growth dimension to the market which we will continue to aggressively pursue,'' he added.

"Both companies continue to experience significant growth rates. This restructuring will ensure this growth into the next century which, in addition, will secure the competitiveness of the companies and enhance employment opportunities in the long term. We are able to create a much larger publicly-listed company whose trading liquidity should be well above the Chips shares,'' said Mr. William Gresham, president of Chips.

American-born Mr. Midon, chairman and a director of BSL Holdings Ltd., and Mr.

Staples Holdings to hold offering comment for this story.

Minority shareholders of Chips will be offered the chance to exchange their shares for shares in SHL after the public offering.

Trading of Chips was suspended on the Bermuda Stock Exchange Index yesterday.

The company last traded on February 24 at $6.50.

The deal, contingent upon the share offering, is being managed by the Bank of Bermuda's corporate finance group, part of the bank's investment division.

"I believe there is a need in certain industries in Bermuda to consolidate businesses into larger and more effective units not only to improve their competitive edge but also to begin the process of expanding business throughout the region,'' said Mr. Peter Mellor, senior vice president of the Bank of Bermuda and head of the investment division. "We have established this merger and acquisitions capability in order to serve the need of our clients.

Separate discussions between the two companies and the bank have taken place over a number of months, said Mr. Mellor.

Discussion culminated with a corporate restructuring agreement signed on March 1.

Chips Ltd. was incorporated in August, 1980 and went public in November 1993.

The company is the exclusive distributor in Bermuda of Sharp office products.

Staples, exclusive distributor to Bermuda of RICOH products was incorporated in 1991 and acquired the assets of Midsea Ltd. in 1994, which resulted in the company's exclusive distributorship for 3M products.