Staples says FTC rejected updated offer of Office Depot

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. 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. Staples said the FTC, which earlier this month sued to block the deal, had not made a counteroffer but the retailer said it was nonetheless “still willing to continue negotiations” with the agency to come up with an acceptable solution. 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.

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 and Walmart wmt among many others were stealing market share. A trial has been set for March 21 in Washington. “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. During a court hearing last week, Diane Sullivan, a lawyer for Staples, said that the companies had held “significant and substantial discussions” with the FTC.

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. At the same time, its commercial contracts business is growing, illustrating how much it wants to get a deal done if it is willing to lose $1.25 billion in contracts. 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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