Published On: Wed, May 11th, 2016

Office Depot and Staples Cancel Merger

By Casey Westfall

The proposed merger between Office Depot and Staples is dead.

Yesterday, U.S. District Judge Emmet Sullivan blocked Staples proposed $6.3 billion acquisition of Office Depot.

The merger between the rival companies was challenged by the Federal Trade Commission, who filed a lawsuit against Office Depot and Staples back in December.

“Today’s court ruling is great news for business customers in the office supply market,” said Debbie Feinstein, the director of the FTC’s Bureau of Competition, in a statement released following Judge Sullivan’s ruling. “This deal would eliminate head-to-head competition between Staples and Office Depot and likely lead to higher prices and lower quality service for large businesses that buy office supplies.”

Following this, Office Depot CEO Roland Smith issued his own statement on the decision.

“While we are respectful of the Court’s decision to grant the FTC’s request for a preliminary injunction to prevent our merger with Staples, we are disappointed by this outcome and strongly believe that a merger would have benefitted all of our customers in the long term,” said Smith.

Staples’ CEO, Ron Sargent, said that the company was “extremely disappointed” by the request for a preliminary injunction, saying that “it failed to define the relevant market correctly, and fell woefully short of proving its case.”

Judge Sullivan’s ruling marks the second time the government has blocked the two companies from merging, with the first time being in 1997.

Despite their dissatisfaction with the ruling, both Sargent and Smith have stated that they will not challenge it, and will terminate the merger which will be effective May 16. In addition, Staples will pay Office Depot a $250 million breakup fee.

As soon as news of the merger’s termination broke, both companies saw a substantial decrease in their shares. Office Depot saw their shares go down 38.7% while Staples went down 17.5%.

The ruling will ensure that Office Depot will continue to call Boca Raton their home, but the company now faces new challenges.

Both companies have reported decreased revenues over the past few years, with Office Depot reporting an 11% decrease last year, while Staples reported a 7% decrease.

Roland Smith said that Office Depot is “looking forward to re-energizing [their] business,” and that an investor conference call will be held May 16 to discuss what steps the company must now take, while Ron Sargent said that he will prepare Staples for the future “by reshaping [their] business, while increasing [their] focus on mid-market customers in North America and categories beyond office supplies.”

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