The Staples and Office Depot Merger Will Not Happen After All
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The Staples and Office Depot Merger Will Not Happen After All

The FTC says that the deal would eliminate head-to-head competition and likely lead to higher prices and lower quality service

May 11, 2016

Staples and Office Depot plan to terminate their $6.3 billion merger agreement following a recent ruling by the U.S. District Court for the District of Columbia which granted a request by the Federal Trade Commission (FTC) for a preliminary injunction to block the acquisition.

In a statement, FTC Bureau of Competition Director Debbie Feinstein said that the Court's ruling "is great news for business customers in the office supply market." Feinstein went on to say that "this deal would eliminate head-to-head competition between Staples and Office Depot and likely lead to higher prices and lower quality service for large businesses that buy office supplies."

Under the preexisting terms of the merger agreement, Staples will pay Office Depot a $250 million break-up fee.

Staples' Chairman and CEO Ron Sargent said that, despite being dissatisfied with the Court's decision, the retailer will not appeal the FTC's decision to block the merger. "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," Sargent 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. We are positioning Staples for the future by reshaping our business, while increasing our focus on mid-market customers in North America and categories beyond office supplies."

Office Depot Chairman and CEO Roland Smith echoed that sentiment. "While we are respectful of the Court's decision to grant the FTC'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 benefitted all of our customers in the long term," Smith said in a statement. "As the Staples merger process comes to an end, we look forward to re-energizing our business."

Office Depot also says that it will not appeal the decision. The merger agreement will be officially terminated on May 16, 2016.

Staples says that it plans to look for a buyer for its European operations so that it can focus on North America. The chain has closed more than 300 of its 1,400 stores in North America since 2011. The company says that it plans to close at least 50 additional stores in North America in 2016.

Office Depot currently operates 1,800 stores in 59 countries.