Staples, Office Depot Could Be One: Report

Merger would face tough regulatory muster
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Staples and Office Depot are in advanced merger talks, sources told the Wall Street Journal.

Framingham, Mass. – Staples and Office Depot are in advanced merger talks, sources told the Wall Street Journal.

Details of the negotiations weren’t available, and any proposed combination is certain to face an arduous review by the Federal Trade Commission (FTC).

As reported here last year, hints of a coupling emerged in December after activist investor Starboard Value acquired a 6 percent stake in Staples and increased its position in Office Depot from 8.6 to 10 percent of shares.

At the time, retail analyst David Strasser of Janney Capital Markets said Starboard was intent on getting both office supply chains to the negotiating table. He also said neither retailer seemed opposed to a merger based on his own discussions with their management teams.

Staples is the nation’s No. 1 office-supply chain and still maintains a sizeable lead over second-place Office Depot even after its 2013 merger with OfficeMax.

Observers believe a consolidation would allow the specialty chains to better defend themselves against office-supply inroads from Costco, Walmart, Amazon.com and other discounters. But many, including management, have questioned whether the merger would pass regulatory muster with the FTC, given the lack of competition on the contract side of their businesses.

Starboard, which last year ousted the entire board at Darden Restaurants (Olive Garden, LongHorn Steakhouse), had also pressed for a merger between Yahoo and AOL last fall, the New York Times reported.

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