February 10, 2016
The European Commission (EC) had been investigating the deal, setting the original deadline of 16 March for a decision last year, and it has already been approved in Australia, New Zealand and China. New York Times reported on the deal’s passage in Europe, which came “after the companies agreed to sell some of Office Depot’s operations in Europe to ease competition concerns”.
Antitrust officials at the EC said that the sale of Office Depot’s “contract distribution business” in both the EU and Switzerland “address[ed]” its concerns over competition, while the company’s “entire business in Sweden” will also be sold. In its review, the EC found that the two companies “are two of only three suppliers of items like pens and paper capable of entering into the international supply contract market for large business customers in Europe”.
It added that “customers do not consider switching to several national contracts as a sufficiently-attractive alternative because of the lower prices achieved under international contracts and the savings in administrative costs”. In turn, the “competition from specialist suppliers, such as companies supplying only printer cartridges, is limited as they offer a smaller product range and typically cannot provide the same services as those offered by contract stationers”.
In summary, it said that it was “satisfied that the divestitures” made would “remove the entire overlap between the merging companies in all markets where concerns were raised”. Margrethe Vestager, Commissioner for European competition policy, added that “the substantial remedies package offered will ensure that effective competition is maintained, in particular on the EU’s international office supplies market.
“This will allow European companies to continue to benefit from the single market by procuring their office supplies internationally and to reduce costs”. Ron Sargent, Staples’ Chairman and CEO, added that the decision “is a significant step, and we’re very pleased that the European Commission has approved this transaction. We look forward to a full, impartial judicial review in the United States”.
In the US, the Federal Trade Commission (FTC) filed a lawsuit last year to block the $6.3 billion (€5.8 billion) merger, with the suit seeing the companies offer to divest $1.25 billion (€1.14 billion) of commercial contracts in exchange for approval. This was rejected by the FTC, leaving Staples to call it “misguided”, and was an upgrade from a previous offer of $600 million (€558 million).
Both companies extended their merger agreement to May in January in light of the court case, after new developments earlier this year suggested “renewed optimism” in the merger being granted, but sources recently 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.
Categories : World Focus