US court blocks Staples-Office Depot $6.3 bn merger over antitrust concerns

Staples and Office Depot yesterday said that they are terminating their planned $6.3-billion merger after a US federal judge blocked the deal over antitrust concerns.

''There is a reasonable probability that the proposed merger will substantially impair competition,'' Judge Emmet Sullivan wrote in a short three-page order. His full order is scheduled to be released next week.

Massachusetts-based Staples said in a statement that it would terminate the merger and pay Office Depot a $250-million break-up fee.

In February 2015, Staples offered to buy its smaller rival Office Depot in a deal valued at $6.3 billion, aiming to compete with bigger e-commerce rivals such as Amazon and eBay. (See: Staples acquires rival Office Depot for $6.3 bn) 
 
The merger had been approved, with concessions, in all jurisdictions except for the US and Canada. In December, the US Federal Trade Commission (FTC) sued to block the deal, saying that the proposed merger would stifle competition and raise prices for customers.

The FTC alleged that post-merger, Staples would control more than 70 per cent of the office supplies market, while the next-largest competitor would hold less than 5 per cent.

The FTC also alleged that the merger would likely lead to higher prices of office supplies, particularly for big businesses.

This is the second time that the FTC has blocked the Staples-Office Depot merger efforts. In 1997, the FTC had successfully prevented the merger, although both companies had this time argued the market had considerably changed since 1997.

''Today's court ruling is great news for business customers in the office supply market,'' FTC competition chief Debbie Feinstein said in a statement. ''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.''

Florida-based Office Depot, formed through the merger of Office Depot and OfficeMax in 2013, is a leading global provider of products and services for workplaces. The company employs over 58,000 people and serves customers in 57 countries.  It has 2,000 retail stores and e-commerce sites operated directly, through joint ventures, franchisees and partners

Office Depot offers products under various labels, including Office Depot, OfficeMax, Viking Office Products, Foray, Ativa, Grand & Toy, TUL and DiVOGA.

Staples is a leading retailer of office supplies, technology, furniture, safety supplies, medical supplies, copy and print services. The company operates throughout North and South America, Europe, Asia, Australia and New Zealand and its annual turnover is around $23 billion.