January 4, 2016
The office supplies company said the FTC’s perspectives on the merger with Office Depot were “fundamentally flawed” and “misguided”.
The court paper statements were made in the aftermath of Staples’ latest offer to the Federal Trade Commission (FTC) – to divest $1.25 billion (€1.14 billion) of commercial contracts in exchange for approval of the $6.3 billion (€5.8 billion) merger – being rejected. This was an upgrade from its previous offer of $600 million (€558 million), but the FTC “rejected the company’s offer without making a counteroffer”, according to Staples.
The raised offer was part of Staples’ efforts to “continue talks with the FTC to address the antitrust regulator’s concerns”, and The Recycler recently reported there is as yet “no deal” in attempts to allow the merger to proceed, despite early negotiations. The two companies previously called the decision to block their merger “flawed”, with a court case likely in March 2016. The European Commission is also investigating the deal, and has set the deadline of 16 March for a decision, while it has already been approved in Australia, New Zealand and China.
The FTC filed a lawsuit to block the deal, alleging it would eliminate competition, and Staples’ latest comments were reported by The Street and Fortune, with the company described as going “on the attack in an attempt to win” and “not going to go away quietly”, with the court papers filed on 23 December.
The FTC’s complaint, Staples stated, was “a misguided application of the antitrust laws”, with both businesses facing “fierce competition today and in the future from a strong and expanding set of competitors”. It added that the FTC claims that a merger would harm both companies’ competition were “fundamentally flawed”, noting in turn that both businesses were “still willing to continue negotiations”.
Lawyer Andrea Murino told The Street that “Staples and Office Depot have not shown the FTC that by divesting commercial contracts, it would create a meaningful competitor to their combined company. The FTC doesn’t do its assessments in a vacuum – it talks to customers, competitors and in this case, they have decided the market is not as diverse as Staples and Office Depot suggest”. She added that “it is rare for the FTC to file a lawsuit to block a transaction like they did here”, and noted that “Staples’ best bet now is to put all of its eggs into the basket of the litigation”.
The Street surmised that the FTC “clearly wants Staples to fork over even more commercial contracts”, while Murino added that the “deal is not dead” due to having many aspects that a judge will look over. Despite this, Staples and Office Depot have lost 45 and 41 percent respectively in shares since the latest offer was disclosed, with the former set to “become poorer” and “face stiff competition from Amazon”.
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