Staples’ remedy for Office Depot rejected by US

20 Jan 2016 | Author: | No comments yet »

FTC Rejects Staples-Office Depot Deal Without a Counteroffer.

Staples Inc. will have to do more to smooth government opposition to its proposed takeover of Office Depot Inc. after the U.S. rejected its latest attempt to win antitrust approval.

Federal Trade Commission, the company said on Monday, thwarting again its attempt to create a larger entity better able to contend with the major changes reshaping the office supplies market. Seeking to mollify the FTC’s opposition to the deal, Staples had offered to sell off or give up $1.25 billion worth of commercial contracts, a bright spot in its otherwise pressured business.

Per Bloomberg Business, Staples recently offered to divest a total of $1.25 billion in commercial contracts in hopes of pushing the acquisition through, but that wasn’t enough for the FTC; today Staples announced that the offer has been denied. Staples says it’s willing to continue negotiating with the FTC, but it’s clear that the commission isn’t a fan of the two top office supply chains joining together. The FTC says that the tie-up of the No. 1 and No. 2 office-supply retailers will eliminate competition and raise prices for corporate customers that purchase under contract. Upon filing its lawsuit, the FTC said Staples and Office Depot merging into one company would likely “eliminate beneficial competition that large companies rely on to reduce the costs of office supplies.” That’s very much unlike Office Depot’s purchase of OfficeMax in 2013, which got the thumbs up from regulators without any real trouble.

Staples Chief Executive Officer Ron Sargent said at the time the transaction would help it cope with a changing competitive environment and save at least $1 billion in costs. The FTC filed an antitrust lawsuit against the transaction Dec. 7 and will ask a federal judge to block the deal at a trial set to begin March 21 in Washington.

Office Depot bought OfficeMax two years ago, reducing the Big Three in office supplies to the Big Two, at a time sales were in serious decline as rivals like AMZN 0.20% and Walmart WMT 1.19% among many others were stealing market share. FTC lawyer Tara Reinhart responded that the agency has told the companies that it’s concerned that they are merely transferring contracts and not divesting physical assets. If the FTC just wants physical assets such as distribution centers sold, that may make a settlement easier than if it’s also worried about the ability of the buyer to compete effectively, said Jennifer Rie, an antitrust analyst at Bloomberg Intelligence in New York. The Framingham, Massachusetts-based company said it would contest the FTC’s lawsuit in court in order to complete the transaction. “The company is confident in its legal position and looks forward to a full and impartial judicial review of the matter,” Staples said in the statement.

A merger between canned tuna companies Bumble Bee and Chicken of the Sea was called off and General Electric canceled a contested $3.3 billion sale of its home appliances unit to Sweden’s Electrolux.

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