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Friday, March 29, 2024 | Back issues
Courthouse News Service Courthouse News Service

Court Ruling Kills Staples Office Depot Merger

(CN) — A federal judge granted the Federal Trade Commission's request to halt the proposed $6.3 billion merger of Staples and Office Depot for violating anti-trust laws, causing Staples to call off the deal.

"Plaintiffs have met their burden of showing that there is a reasonable probability that the proposed merger will substantially impair competition in the sale and distribution of consumable office supplies to large Business-to-Business customers," U.S. District Judge Emmet Sullivan said.

The two office supply companies immediately announced that they will terminate their merger agreement. Staples will pay Office Depot a $250 million termination fee to cancel the deal.

Last year, Staples announced that Office Depot shareholders had overwhelmingly approved its offer to buy the rival office supplies retailer for $6.3 billion. The transaction valued Office Depot at $11 per share, which shareholders would receive in cash and Staples stock.

EU regulators approved the merger, as long as the combined company sold Office Depot's distribution business in Europe and Switzerland, and closed stores in Sweden.

But the Federal Trade Commission filed an administrative complaint blocking the deal in December, claiming that the merger would significantly reduce competition in the office supplies market, leading to higher prices and lower quality.

Office Depot CEO Roland Smith said in a statement Tuesday evening that he is "disappointed by this outcome and strongly believes that a merger would have benefited all of our customers in the long term."

Staples CEO Ron Sargent said, "We are extremely disappointed that the FTC's request for preliminary injunction was granted, despite the fact that it failed to define the relevant market correctly, and fell woefully short of proving its case."

However, both companies stated they will not appeal the ruling.

Sullivan's decision marks the second time the FTC successfully blocked these two companies from merging. The companies' first attempted merger was in 1997.

Both companies' shares took a nose-dive in after hours trading, and were halted after Staples fell 10 percent and Office Depot fell 26 percent.

The American Postal Union was among the organizations that opposed the merger.

Mark Dimondstein, president of the postal workers union, said the court made the right decision. "If the merger had been allowed to go through, Staples would be the only office supply superstore chain left standing. That would have led to higher prices and fewer choices," he said.

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