Staples-Office Depot Merger Likely To Be Cleared By Regulators, Says Former SEC Commissioner

Staples, Inc. SPLS and Office Depot Inc ODP are slated to merge in a deal valued at $6.3 billion.

Former SEC Commissioner Steve Wallman told Benzinga that while there are some antitrust issues that need to be addressed, the merger is likely to go through.

"The antitrust issues with regard to Staples and Office Depot are obvious," Wallman, who founded Folio Investing and serves as its CEO, told Benzinga. "They were obvious back in the '90s when they first tried to do the merger. The Justice Department said, 'You've got to be kidding.'"

Wallman said that the antitrust issues are now a "little less obvious" because of online retailers that have made it easier to acquire office supplies.

"The world has changed quite considerably since the '90s when that merger was first proposed and not allowed to go forward," he said. "My guess is it will be allowed to forward now. Both Staples and Office Depot have [not] been the most fast-growing companies over the last few years. There have been some real problems for them and I think that market is going to get more and more challenging."

Wallman speculated that there may be some required spinoffs in particular jurisdictions, but said the Justice Department would ultimately be the one to make any merger-related decisions.

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Comcast-TWC Vs. Staples-Office Depot

There is growing concern that the merger between Comcast Corporation CMCSA and Time Warner Cable Inc TWC may not happen. Some analysts are convinced the deal won't get approved. Former FCC Commissioner Michael Copps thought the deal should have been dead on arrival.

"The antitrust and related-type of issues are actually a little bit different between the two," said Wallman. "In the Staples/Office Depot case, a lot of the overlap is in physical locations. You may have a Staples literally half a mile from an Office Depot."

There are also areas where neither store can be found for 50 or 100 miles.

"The overlap there is geographic and convenience in terms of delivery," Wallman continued. "But there are lots of current competitors to that. You can find office supplies in many different channels without having to go to a big box store to get it."

Comcast and Time Warner Cable differ in that they tend to operate in their own exclusive territories without a huge amount of overlap.

"The issue there is the concentration of power with regard to the control over distribution of content," Wallman explained.

Since those two organizations control a large amount of what gets shown to the public (and control whether some content is even produced), Wallman is concerned about one entity gaining too much power.

"[Merged cable companies may] be able to say, 'We're going to carry these cable shows' or not," said Wallman. "Or say, 'We don't like this view, so we're not going to let it be shown on our cable company services.' That's a real significant issue."

Wallman said it's not quite an antitrust issue but is "more of a question of who should be in control of the gate-keeping for what content the American public gets to see."

"And how much concentration do you want in that gatekeeper in one entity that controls so much of what passes by the American households," he added.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

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