In what is another blow to the Staples, Inc. SPLS and Office Depot, Inc. ODP merger, the Federal Trade Commission (“FTC”) rejected the revised offer of the former, which would lead to the formation of an office supply colossal. Previously, the FTC had filed a lawsuit to block the merger of the office supply retailers fearing that this $6.3 billion deal would reduce competition nationwide and result in price hikes and fewer options for large corporates who usually make bulk purchases.
After objection from the FTC, Staples agreed to divest $1.25 billion of commercial contracts to ease monopoly worries. However, the FTC rejected the proposal without placing a counteroffer. Staples also said that the company is still looking to discuss matters with the FTC to make the merger possible. On the other hand, the company is pursuing legal action and looking forward to “a full and impartial judicial review.”
Staples and Office Depot had indicated that the merger would help generate net synergies in excess of $1 billion over the three-year integration period. They further added that the deal would help lower prices, make product and technology advancements, and drive growth in categories beyond office supplies.
Both companies argued that competition has intensified in the office supplies space due to the entry of new players, which the FTC should consider as it did during the approval of Office Depot's buyout of Office Max in 2013.
Industry experts in favor of the deal believe that synergies from the merger will help the combined entity to effectively compete with mass merchandisers like Wal-Mart Stores Inc. WMT and online retailers like Amazon.com Inc. AMZN, which have now expanded into the office supplies sector. Also, this combination will help attain cost synergies and provide consumers with a better omni-channel platform.
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