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Staples, Office Depot terminate planned merger after judge issues preliminary injunction

By Shawn Knight
May 11, 2016
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  1. Staples announced in February 2015 that it had reached an agreement to purchase rival office supplies store Office Depot in a deal valued around $6.3 billion. The regulatory road to closing the deal has been peppered with potholes and now that a judge has weighed in, the two sides are calling it quits.

    In December, the two companies ran into a major hurdle by the name of the Federal Trade Commission. The FTC believed a merger would reduce competition for office supplies sold to large companies and thus, filed a request for a preliminary injunction to block the acquisition.

    U.S. District Judge Emmet Sullivan recently sided with the FTC and blocked the deal, bringing an official end to the merger.

    Roland Smith, Office Depot chairman and CEO, said they are respectful of the court’s decision to grant the FTC’s request for a preliminary injunction but are disappointed by the outcome and strongly believe that a merger would have benefitted all of its customers in the long term.

    Ron Sargent, Staples chairman and chief executive officer, said they are extremely disappointed that the FTC’s request for preliminary injunction was granted despite the fact that it failed to define the relevant market correctly and fell woefully short of proving its case.

    Both companies vowed to terminate the merger agreement effective May 16 and forego appealing the ruling. A clause in the original agreement stated that if regulators blocked the merger, Staples would be forced to pay Office Depot $250 million.

    Share value in Office Depot is down nearly 40 percent on the news while Staples stock has dropped more than 15 percent.

    Permalink to story.

     
  2. Uncle Al

    Uncle Al TS Evangelist Posts: 1,684   +790

    Sounds like they need to wait a little longer then they can buy them out of the bankruptcy court for pennies on the dollar.
     
    p51d007 likes this.
  3. psycros

    psycros TS Evangelist Posts: 1,324   +711

    By that point both chains will be in trouble. The problem is that the powers-that-be are looking at this as a potential monopoly, which in smaller markets and in a very broad sense it would be. Yes, its hard to find a lot of the products these two companies sell anywhere else...until you consider the Internet. Its no longer retail chain vs retail chain - its retail chains vs each other, and Amazon, and Newegg, and all the rest of the online world. Once again, the law isn't keeping up with the times. For the same price as what I'd pay for a $200 item at Office Depot can have it shipped next day air and get a better warranty! If I'm willing to wait a few days I can save a lot of money, too. Unless I need something right now I'm not about to bother with overpriced retail outfits unless there's a very good sale going on.
     
    p51d007 likes this.
  4. p51d007

    p51d007 TS Evangelist Posts: 914   +391

    Bet neither store will be around in a few years. One chain might go on if they merged, but two can't. In smaller cities, people go, but in large metro areas, most would rather have it delivered if they can wait a couple days and avoid the hassle of driving into the city, parking, fighting to get back, just for ink cartridges, ink pens, staples, packing tape and the like.
     
  5. mbrowne5061

    mbrowne5061 TS Evangelist Posts: 340   +133

    The FTC's lawsuit in this case had nothing to do with you or me in this case. It wasn't about consumers or small businesses. In this case, it was about concerns of limiting competition at the corporate level. The FTC was concerned that medium-large offices wouldn't have enough competition when it came to purchasing their office supplies - and they are right. Staples and Office Depot are pretty much it for national-sized office suplpy chains (last time I checked, neither Amazon nor Newegg have "corporate supply dept"). There are smaller, regional chains, but I doubt they would be able to compete against a single super-chain for very long.
     

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