U.S. Government Deals Another Blow to Proposed Staples-Office Depot Merger

20 Jan 2016 | Author: | No comments yet »

FTC Rejects Staples-Office Depot Merger, Again.

After facing another setback to its planned acquisition of Office Depot, Staples has announced that it has decided to sue the Federal Trade Commission (FTC) over the deal.

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 said in the statement, “The company is confident in its legal position and looks forward to a full and impartial judicial review of the matter.” An administrative trial on the Office Depot merger is set to begin on May 10, 2016. 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. 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. The complaint from the agency claimed that the transaction would violate antitrust laws by significantly reducing competition nationwide and should be blocked.

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 Amazon.com AMZN 0.03% and Walmart WMT 0.83% 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.

At the time the deal was announced, the bid was worth $6.3 billion, but it has fallen significantly in value since then as Staples shares have fallen. 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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