Staples, Office Depot Delay Merger - Twice

Staples, Office Depot Delay Merger

Awaiting outcome of FTC suit
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The nation’s two largest office-supply chains have put off their planned merger until May while they fight a Federal Trade Commission lawsuit seeking to block the marriage.

The nation’s two largest office-supply chains have put off their planned merger until May while they fight a Federal Trade Commission lawsuit seeking to block the marriage.

The regulatory agency filed an administrative complaint in December, charging that Staples’ proposed $6.3 billion acquisition of Office Depot would violate antitrust laws by significantly reducing category competition within the B-to-B channel.

The chains said that extending their merger agreement for a second time, from Feb. 4 to May 16, will allow the litigation to be completed. The case is expected to go before a federal district court on March 21.

In the meantime, the retailers are working to extend the financing terms of the transaction, although investors are reportedly balking over agreed upon interest rates that have risen significantly since the loan was locked in.

Nevertheless, Staples CEO Ron Sargent said the chains are “committed to completing this transaction and look forward to a full and impartial judicial review.”

In an open letter from December, Sargent and his Office Depot counterpart Roland Smith reiterated their argument that the merger would generate significant cost savings resulting in lower prices for all customers.

Staples has projected “net synergies” of more than $1 billion over a three-year integration period as the merged operation “aggressively reduces global expenses” and closes redundant stores.

The two had tried to tie the knot in 1997 but the deal was scuttled amid federal regulators’ antitrust concerns. Since then the marketplace has become exceedingly more competitive, the retailers argued, given the advent of e-commerce and the growth of national discount chains.

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