Staples and Office Depot abandon their merger – The World

The merger between Staples and Office Depot, which was to create a giant office supplies is dead and buried. Both distributors have announced, Tuesday, May 10, they gave up the approximation to the result of the decision the same day a federal judge to block the transaction.

This decision confirms arbitration made December 7, 2015 by the authority of the US competition, the Federal Trade Commission (FTC), which estimated that the merger of more than $ 6.3 billion (5.8 billion euros) “violates antitrust laws by significantly reducing competition in the national market office products sold to businesses. ”

Staples CEO Ron Sargent said he was “disappointed that the court has validated the request of the FTC, although it has not defined the market properly and has not proved its case “. ” It is in the best interest of our shareholders, customers and partners to waive appeal, to terminate the merger agreement and to focus on our strategic plan to deliver value to shareholders “, he said.

Avoiding a monopoly

the judge found that the transaction would “substantially harm competition in sales and office supplies distribution for business customers.” the two signs are indeed the last two actors able to provide businesses across the US territory, which would have created de facto monopoly. “This would likely lead to higher prices and lower quality service for large companies buying office supplies” , welcomed Debbie Feinstein, the head of the competition within the FTC

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the sequence of events looks complicated for Staples, which in addition to the payment of compensation for breach of $ 250 million to Office Depot, will have to give up synergies were estimated at $ 300 million per year. The group, which has 1 900 stores, had already closed 300 in 2011 and plans to cut another fifty this year.

This is the second failure for the two companies, which had already tried to get closer in 1997. at the time, the FTC it was also opposed. Staples and Office Depot thought, eighteen years later, the competitive landscape had changed, especially with the development of Internet distribution and the emergence of Amazon, which now generates more than a billion dollars in sales of business in this sector. In 2013, the FTC had also authorized two behemoths, Office Depot and number three in the sector, OfficeMax, to merge.

But by focusing on the professional market and not individuals, the ‘competition authority has once again foiled the hopes of both groups. This area would have represented 40% of the turnover of the new entity. A size effect that was supposed to compensate for sales in physical stores, which tend to decline. Revenues Staples dropped 6.4% to $ 21.1 billion in the past year, while those of Office Depot fell 10% to 14.5 billion.