Staples and Office Depot will finally receive a US regulatory decision on their proposed merger by 8 December.
The office-supply retailers say that they have agreed with the Federal Trade Commission to extend the review period for the $6,3-billion Office Depot acquisition.
The FTC also agreed to make its decision by the December date, the two companies announced on Monday. It could approve, deny or impose conditions, such as a sale of assets, on the retailers’ merger.
“The fact that the review period is being extended suggest that the parties are trying to find a way to get the transaction done,” says Robert Brighton, Jr, a South Florida merger and acquisitions lawyer.
He says the FTC is probably trying to figure out whether a combination of divestures or consent agreements would satisfy its concerns about the merger’s potential effects on price competition.
Staples and Office Depot says on 28 August they had substantially complied with the FTC’s so-called “second request” for more information about the proposed transaction. The agency then had 30 working days to review the materials, which would have brought the deadline to Monday.
Office Depot employs about 2 000 people at its headquarters in Boca Raton. If the FTC and other regulatory agencies give their clearance, the combined company will be headquartered at Staples’ campus in Framingham, Massachusetts, Staples has says.
“We’re pleased to reach an agreement with the FTC to extend the review period for the Office Depot transaction,” says Ron Sargent, chairman and chief executive of Staples. “We will continue to work cooperatively with the Federal Trade Commission.”
Jefferies analyst Daniel Binder says he believes the commissioners view a settlement as a possibility, “or would have likely moved sooner to block the deal. The question is whether a reasonable and economic remedy can push this across the finish line.”
Regulators in Australia, New Zealand and China have approved the transaction. Staples and Office Depot continue to work with regulatory authorities in the European Union, the United States and Canada. The European Commission says recently it would take a deeper look at the proposed transaction.
Office Depot shareholders approved the company’s acquisition by Staples on June 19.
An earlier deal in 1997 to combine Office Depot with Staples was nixed by regulators. But in 2013, the FTC cleared Office Depot’s acquisition of OfficeMax, then the third-largest competitor in the office-supplies business nationwide.
South Florida economist Ken Thomas says he thinks the FTC and European Commission will challenge the deal in court. “I believe they will conclude it is anti-competitive and counter to good public policy at both the retail and wholesale levels,” he says.
But the regulatory authorities “want to be as positive as possible in their public statements,” he says.
Staples’ stock declined 18 cents on Monday, closing at $12.19, while Office Depot’s stock fell 10 cents to $6.58. Both companies trade on Nasdaq.
By Marcia Heroux Pounds for www.sun-sentinel.com