March 18, 2016
The New York Post reported on rumours and expectations arising from a “prominent investor activist” taking a stake in Office Depot, because of suggestions that Amazon is “eyeing the corporate business unit” of the retailer in a deal “that will clear all regulatory barriers to its merger with Staples”. The rumours came from “a person familiar with the investor’s thinking”, and “while no decision had yet been made” about the supposed deal, “there has been talk on Wall Street” that Amazon CEO Jeff Bezos “was looking to expand his Amazon Business footprint”.
The corporate business unit acquisition would see Amazon “use some of Office Depot’s corporate accounts to jump-start its new office supply business”, and the activist believes “there could soon be a settlement” in the Staples-Office Depot case. Yesterday, it was revealed that the Federal Trade Commission (FTC) had met with Staples and Office Depot over proposed new settlement offers.
The FTC said it would approve the merger if both companies divested a “going concern”, though Staples’ lawyer commented that “nothing’s come of that” meeting. Interestingly, the lawyer also asked the judge if one of the company’s attorneys could cross-examine Prentis Wilson, Vice President of Amazon Business, because Amazon is “a key and growing and dominant, or soon to be dominant, competitor in the business-to-business market”.
Judge Emmett Sullivan responded “why can’t he be here? Subpoena him. Tell him I encourage him to honour the subpoena”. Earlier this week, Staples also submitted a court motion to get more documentation from Amazon, because Staples and Office Depot “are trying to show in court that Amazon and other online and discount retailers create stiff competition that threatens the companies’ ability to survive separately”.
The New York Post also pointed out that Amazon is reportedly “weighing a bid” for W.B. Mason, the third-placed US office supplier, and surmised that a deal between Office Depot and Amazon “would create a stronger number two player in the sector and help Staples get the FTC to reverse its decision” to block the merger. Both Staples and Amazon declined to comment on the story.
The FTC filed a lawsuit last year to block the $6.3 billion (€5.8 billion) merger, with the companies offering to divest $1.25 billion (€1.14 billion) of commercial contracts in exchange for approval. This was rejected, leaving Staples to call it “misguided”, and was an upgrade from a previous offer. Both companies extended their merger agreement to May in January, after new developments suggested “renewed optimism” in the merger being granted, but sources stated “the odds of a settlement are near zero”.
Staples is also reportedly facing the threat of loans being withdrawn, and made a series of staff cuts. The two companies previously called the decision to block their merger “flawed”, with a court case likely in March. However, the EU recently approved the merger after concessions, while both companies also sold their corporate contract business to Essendant, but the FTC was said to have been “unimpressed”. Meanwhile, Staples has now revealed it plans to close 50 stores this year, and confirmed that over 1,000 jobs had been cut.
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