Feds oppose merger?: Staples Office Depot Merger

Published: November 30, 2015

Feds oppose merger?: Staples Office Depot Merger, Regulators at the Federal Trade Commission are leaning toward blocking Staples’ merger with Office Depot, according to The New York Post.

The Post reports that regulators are worried that the $6.3 billion proposal would create a monopoly in the office supply sector, leaving just one mega-company to serve government and large corporate clients. One estimate has Staples serving all Fortune 1,000 companies.

Per the New York Post:

“They are ramping up for litigation,” said one source close to the situation.

There’s also the possibility that the agency will delay its decision again in an effort to extract more concessions from Staples, which reached the deal to buy Office Depot in February.

As it stands, two of the four commissioners are believed to oppose the deal, and the FTC doesn’t like votes to end in a 2-2 tie. In the event of a deadlocked vote, the agency does nothing.

Staples has offered concessions to appease the commissioners, such as a transfer of $600 million worth of corporate contracts to Essendant, though it remains to be seen whether that will be enough.

But according to USA Today, Staples has provided itself an out should the deal face anti-trust litigation. Staples could back out of the deal if the FTC decided that it would require divestiture of assets totaling more than $1.25 billion of Office Depot’s 2014 domestic revenue.

Per USA Today:

If the deal is approved, Staples will acquire all of the outstanding shares of Office Depot for $7.25 in cash and 0.2188 of a share in Staples stock. That values Office Depot at $11.00 per share, or a premium of 44% over the closing price of Office Depot’s shares as of Feb. 2.

The FTC has until Dec. 8 to decide whether or not to halt the deal.

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