FTC unimpressed with Essendant proposal

February 25, 2016

The US Federal Trade Commission said the proposed sale of contracts to Essendant by Staples and Office Depot “would not fix anything” regarding their merger.

The FTC filed a lawsuit last year to block the $6.3 billion (€5.8 billion) merger between Staples and Office Depot, 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 of $600 million (€558 million).

Both companies extended their merger agreement to May in January, after new developments had suggested “renewed optimism” in the merger being granted, but sources then 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 Staples is also reportedly facing the threat of loans being withdrawn, and made a series of staff cuts.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”, though the EU recently approved the merger after Staples and Office Depot made concessions.

The prospective sale of business to Essendant was speculated to “appease federal regulators weary” of the merger’s back-and-forth, but Sun Sentinel reported that the FTC, in a court filing at the US District Court in Washington DC, said the proposed sale “would not fix anything” with regards to helping the merger go ahead.

The FTC is seeking a “preliminary injunction to stop the merger from proceeding until after a scheduled trial” on 10 May, adding that the “divestiture […] would not position [Essendant] to compete for large business-to-business customers”. Additionally, customers “would be free to choose the combined Staples/Office Depot as their office supplier, rather than to continue with Essendant”.

On being asked to comment, Staples referred to the Essendant sale press release, highlighting that the latter company would see an increased “presence with large corporate customers”, improved capabilities and help “enable independent dealers […] to more effectively compete for national account business”. Office Depot “did not immediately respond to a request for comment”.

Sun Sentinel added that the sale was “intended to appease regulators” and the judge in charge, and noted that the FTC’s recent brief pointed out that Staples CEO Ron Sargent “displayed a poster in his office showing that Staples and Office Depot were the incumbent office-supply vendors for 94 of the Fortune 100 companies”, with large B2B customers “agree[ing] with the FTC” that the two retailers are “their two best options for office supplies”.

The brief also argued that “allowing this merger to close before the merits proceeding is completed would irreparably harm the public interest. Staples would be free to begin integrating Office Depot immediately, accessing Office Depot’s sensitive business information, laying off sales people, and approaching customers as a unified dominant supplier […] any harm that customers suffer in the interim would be irreversible”.

Categories : City News

Tags : Business Office Depot Staples