Staples Purchases Office Depot for $6.3 Billion
“This transaction delivers great value for our shareholders and creates a company ideally positioned to serve our customers and grow over the long term,” Roland Smith, chairman and CEO for Office Depot Inc., said in a statement. “It is also an endorsement of our many accomplishments and the tremendous success we’ve had integrating Office Depot and OfficeMax over the past year. We look forward to bringing our experience and knowledge to the new organization.”
However, investors are concerned that the Federal Trade Commission (FTC) will not approve the deal, according to USA Today. That worry caused Staples shares to drop 12 percent the day the merger was announced.
"I think they have to fight it," Staples co-founder and former CEO Tim Stemberg said of the FTC's potential view of the merger. Staples faces "potentially a long and nasty legal skirmish" to get it done, he added.
Staples has given itself an out if the FTC approval process becomes too difficult, according to The New York Times. Staples has agreed to sell off up to $1.25 billion worth of Office Depot's sales, but if the government wants that number to be higher, Staples can walk away from the deal.
Staples also has agreed to a $250 million termination fee if the deal is denied based on antitrust grounds, according to The Washington Times.
In 1997, the pair attempted a merger, according to CNET. The FTC blocked it, but unanimously approved the Office Depot acquisition of OfficeMax 16 years later.
"Customers now look beyond office supply superstores when buying office supplies," the FTC said in 2013. "Non-office supply superstores, such as Wal-Mart and Target, along with club stores like Costco and Sam's Club, have expanded their office supply product offerings and now compete with office supply superstores. Additionally, Internet retailers of office supplies, most prominently Amazon, have grown quickly and significantly, and compete with office supply superstores."