FTC Shoots Down Staples' Efforts To Purchase Office Depot
By Christine Kern, contributing writer
Counteroffer to resolve FTC antitrust suit is rejected.
Efforts by Staples to acquire Office Depot have run into obstacles from the Federal Trade Commission (FTC), which has shot down the latest counteroffer made by Staples that attempted to resolve antitrust issues associated with the acquisition, according to Bloomberg.
Earlier this fall, the FTC, Staples and Office Depot agreed to extend the review period for the proposed acquisition. Ron Sargent, Chairman and CEO of Staples, Inc., explained in October, “This transaction will enable us to better serve our customers and to compete in an evolving marketplace. We will continue to work cooperatively with the Federal Trade Commission.”
The merger, which was proposed in February, raised eyebrows from antitrust regulators, however, as a major step in consolidating the office supply retail market, as Innovative Retail Technologies reported. Staples held a market value of $11 billion and Office Depot of $4.1 billion, according to CNBC. Previous attempts to join the two retailers were thwarted in 1997, when Staples was prevented from purchasing Office Depot by antitrust regulators.
The FTC filed an antitrust lawsuit against the transaction on December 7, and will ask a federal judge to block the deal in the March trial.
However, in 2013, the FTC approved the $976 million acquisition of OfficeMax by Office Depot, without the need to close stores, citing increased competition in the office supply industry. "The current competitive dynamics are very different," the Federal Trade Commission wrote in that review. "The Commission’s investigation shows that today’s market for the sale of consumable office supplies is broader" than it was in 1997.
The current offer by Staples, which included transferring commercial contracts worth up to $1.25 billion, an increase from its previous offer of $500 million, still failed to sway antitrust officials, according to a company statement. According to the FTC, a merger of the top two office-supply retailers would eliminate competition and raise prices for corporate customers with purchasing contracts.
“Staples’ Board of Directors and management team have worked tirelessly to complete the transaction…The FTC rejected the company’s offer without making a counteroffer. The company is still willing to continue negotiations with the FTC to reach a settlement that addresses FTC concerns. At the same time, Staples is pursuing the transaction through litigation. The company is confident in its legal position and looks forward to a full and impartial judicial review of the matter,” Staples said in the statement.