Staples has terminated the proposed merger in light of the
In a crippling blow, U.S. District Court Judge Emmet Sullivan in the District of Columbia has granted the Federal Trade Commission's (FTC) request for an injunction against the $6.3 billion merger of office supply rivals Staples and Office Depot, Reuters reported. Now, Staples has announced that it will terminate the proposed merger as a result of the ruling.
According to the New York Times, the defeat is just one more setback for the two office supply retailers, each of whom have suffered long-term falling sales and increased competition from Amazon and other big-box stores.
The terms of the merger agreement require Staples to pay Office Depot a $250 million break-up fee. Staples also will scrap an agreement to sell more than $550 million in corporate contract business and related assets to Essendant in connection with the move to end the Office Depot deal.
“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,” Ron Sargent, Staples’ chairman and chief executive officer, said in a press release. “We believe that it is in the best interest of our shareholders, customers and associates to forego appealing this decision, terminate the merger agreement, and move on with our strategic plan to drive shareholder value."
Staples closed 242 stores over 2014 and 2015, with another anticipated 50 closings for 2016, while Office Depot shuttered 349 stores in 2014 and 2015 with an additional 400 locations identified to be closed in 2016.
The death of this merger is the latest in a string of anti-trust victories for the Obama administration, which has taken aim at large-scale consolidations. In a speech last month, the U.S. attorney general Loretta E. Lynch stated, “Victories across a wide range of industries make clear that if our analysis leads us to conclude that a merger will restrict competition, we will not hesitate to intervene.”
Both Staples and Office Depot issued statements saying that they planned to move on from the failed merger.
“We are extremely disappointed that the F.T.C.’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,” Ronald L. Sargent, Staples’ chairman and chief executive, said in his company’s statement.
“While we are respectful of the court’s decision to grant the F.T.C.’s request for a preliminary injunction to prevent our merger with Staples, we are disappointed by this outcome and strongly believe that a merger would have benefited all of our customers in the long term,” Roland Smith, Office Depot’s chairman and chief executive, said in a separate news release.
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