Shares of office-supply chain Office Depot Inc. (NASDAQ:ODP) skyrocketed more than 20 percent Tuesday on reports the company and rival Staples Inc. (NASDAQ:SPLS), the largest U.S. office supplies retailer, are in "advanced talks" to merge, the Wall Street Journal reported Monday evening, citing people familiar with the matter.

The report comes after activist hedge fund Starboard Value wrote a letter to Staples on Jan. 20, pressuring the company to merge with rival Office Depot. Starboard revealed in December it had taken a 6.1 percent stake in Staples and increased an existing stake in Office Depot to 9.9 percent.

Framingham, Massachusetts-based Staples is currently valued at $12.14 billion, while Office Depot, which merged with rival OfficeMax Inc. in 2013 for $1.2 billion, has a market capitalization of around $4.85 billion.

Staples posted stronger-than-expected quarterly sales and profit in November as demand for office supplies jumped in the third quarter following six quarters of decline. However, the company warned that its sales would fall in the holiday quarter. The company also said it would shut 170 of its more than 1,500 U.S. stores in North America this year, higher than the 140 stores it had previously estimated.

Staples’ fiscal third-quarter net income rose to $216.8 million, or 34 cents per share, from $135.2 million or 21 cents per share, a year earlier. But revenue declined 2.5 percent to $5.96 billion from a year earlier. Staples will report its annual results on March 6.

Meanwhile, Boca Raton, Florida-based Office Depot reported strong third quarter earnings in November. Office Depot raised its full-year outlook for adjusted operating income to a new range of $255 million to $265 million, compared with “not less than $200 million” it had previously expected. Office Depot is scheduled to announce fiscal fourth quarter earnings and full year results on Feb. 24.

Shares of Office Depot soared 20.45 percent in early trading Tuesday to $9.19 on the Nasdaq, while Staples’ stock price jumped more than 11 percent to $19.02. In the last three months, shares of Staples have gained 47 percent to $15.74, while shares of Office Depot have soared 77 percent to $7.45.