May 9, 2016
The Federal Trade Commission (FTC) filed a lawsuit to block the $6.3 billion (€5.8 billion) merger last year, and took a dramatic turn towards approval after Judge Emmet Sullivan highlighted FTC attempts to pressure Amazon “to lie” about the challenge a combined company might pose. Staples and Office Depot then surprised observers by refusing to present a defence, which was called a “risky decision”.
Amazon had become embroiled amid rumours of it helping out the merger earlier this year, while further settlement talks were revealed that came to nothing. Staples has also offered to freeze prices for approval. Both companies extended their merger agreement to May in January, while the relevance of cartridges to the case was also covered during the trial.
Now, The News International has reported that stockmarket traders are “on edge” as the decision “looms”, with “wild gyrations in the shares” of both Staples and Office Depot expected if the deal is blocked. A decision in the case is expected tomorrow, 10 May, according to Office Depot’s CEO Roland Smith, and if an injunction is granted, it could “kill the deal since protracted litigation makes it difficult to hold a merger together”.
Traders “have pumped up expectations for a large, near-term move” in share prices, with “implied volatility readings” for both companies “at multi-year highs”. Staples’ share prices could swing 18 percent “in either direction” by 20 May, and Office Depot’s share could move “about twice that much”. Staples’ shares have fallen 38 percent in the last year, while Office Depot’s have fallen 33 percent.
Categories : City News