Market Overview

Regulators To Block Staples-Office Depot Merger, Report Says

Regulators To Block Staples-Office Depot Merger, Report Says
  • Shares of Staples, Inc. (NASDAQ: SPLS) were trading lower by nearly 2 percent early Monday afternoon while shares of Office Depot Inc (NASDAQ: ODP) were lower by more than 3 percent.
  • Staples announced in February it intends to acquire Office Depot for around $6 billion.
  • An acquisition within the office supply store segment required regulatory approval and various media sources reported that regulators will block the merger.

The proposed acquisition required the approval of the Federal Trade Commission (FTC) given the limited number of companies that operate in the office supply space.

A combined Staples and Office Depot entity would result in a single nationwide store which raises antirust issues, especially when considering the two companies are essentially the only national office suppliers that serve corporate customers.

According to the New York Post, between Staples and Office Depot, the companies handle all of the Fortune 1000 office supply contracts. To ease concerns, Staples has already offered to transfer roughly $600 million in back-end contracts to the office supply wholesaler Essendant.

See Also: Back In September, Jefferies Thought The Deal Would Go Through

The New York Post noted that Staples' actions thus far to ease concern is insufficient. Citing concerns that a single nationwide office supply store will cater mostly to big corporate and government clients, the FTC will block the companies' merger plans.

The FTC has been studying Staples' proposed transfer of back-end contracts to Essendant, and sources told New York Post that this will actually lead to less competition and higher prices. In addition, the proposal will not be enough to turn Essendant into a nationwide rival to a joint Staples and Office Depot powerhouse.

Posted-In: Essendant FTC Mergers Office DepotM&A News Rumors Legal Best of Benzinga


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