Office Depot and Staples called off their plans to merge, triggering a trading halt for the companies’ stocks Tuesday.
The retailers made the announcement after a federal judge granted a preliminary injunction Tuesday that had been requested by the Federal Trade Commission, which opposed Staples’ plan to acquire Office Depot for $6,3-billion.
Now the companies “plan to terminate their merger agreement”, Staples said in a statement.
The FTC argued in December last year that combining the two companies would give them too large a chunk of the office supply retail market — which would violate antitrust law.
“We are extremely disappointed that the FTC’s request for preliminary injunction was granted despite the fact that it failed to define the relevant market correctly, and fell woefully short of proving its case,” Staples CEO Ron Sargent said in a statement.
The NASDAQ halted trading of both companies’ stock around 6:30 pm ET on Tuesday.
It’s the second time the FTC has blocked a merger of the two office suppliers, having halted their merger previously in 1997.
Staples and Office Depot have faced intense competition from retail stores that are not traditional office suppliers like Amazon (AMZN, Tech30) and Wal-Mart (WMT). The industry is also reeling from a decline in printing activities among young consumers, many of whom don’t even own printers.
Profits at both Staples and Office Depot have shrunk in recent years. Last year, Staples announced plans to shut 225 stores in North America.
But the FTC wasn’t focused on competition over dwindling shoppers for office supplies. Instead, the agency pointed to the market for large business customers, where Staples and Office Depot are often the top two bidders.
“By eliminating competition between Staples and Office Depot, the transaction would lead to higher prices and reduced quality,” the FTC said in a statement last December.
The companies had hoped the merger would help create over $1-billion in annual savings.
By Jackie Wattles for www.money.cnn.com
Boca Raton-based Office Depot says regulatory roadblocks are disrupting its business as Staples tries to buy the company.
The office supply giant reported a 9% decrease in sales in the first quarter of 2016, to $3,5-billion from $3,9-billion year-over-year. Its operating income plummeted 19,32% to $71-million in the first quarter of 2016 from $88-million in the first quarter of 2015.
Its net income in the first quarter of 2016 also decreased 2%, to $45-million, or 8 cents a share, from $46-million or about 8 cents a share.
“The protracted regulatory review of the pending Staples acquisition continues to have a substantial disruptive impact on our business,” says Roland Smith, chairman and CEO for Office Depot, in a statement.
“Our North American Business Solutions Division and International Division are more impacted by this disruption and accordingly, both failed to meet our sales and profit expectations this quarter. In spite of the uncertainty surrounding the acquisition, our associates around the world continue to demonstrate focus, drive and dedication as we finalise this process.”
The preliminary injunction hearing has resumed after ending abruptly when Staples asked that the U.S. government’s lawsuit against the company for its proposed $6 billion buyout of Office Depot be thrown out, and its lawyers would not call any witnesses. U.S. District Judge Emmet Sullivan is expected to make a decision on the case May 10.
Staples, based in Framingham, Massachusetts, entered into an agreement to acquire Office Depot on Feb. 4, 2015. Although the company received approvals from regulatory agencies across the world where the companies do business, the US Federal Trade Commission sued Staples in December to block the number and number 2 office supply companies from becoming one corporation.
Office Depot employs about 2 000 high-paid workers in South Florida, but Staples says its headquarters will remain in Massachusetts if the acquisition moves forward.
By Emon Reiser for www.bizjournals.com
The first day of the federal court hearing in which Staples and Office Depot are making their cases about whether a proposed merger of the two companies would be beneficial to or terrible for consumers began on 21 March.
Both sides made their opening arguments. The FTC is concerned about possible price hikes for consumers, and the two office supply companies are concerned that Amazon is going to crush them.
The argument hinges on an important question: are Fortune 500 companies likely to go shopping for their office supplies on Amazon? While we think of the stores and consumer-facing websites when we think about these two chains, their commercial supply businesses are a lot more lucrative. They are the FTC’s main concern in preventing this merger, not necessarily the retail part of the office-supply business.
In today’s opening statements, an attorney for Staples shared e-mails from representatives of companies, who were concerned that that might face higher prices if one mega-Staples monopoly had control over the supply business pretty much nationwide.
The two companies have proposed selling some of their commercial business to a smaller competitor, Essendant, or what’s called “divestiture” in a merger like this.
The attorney for Staples and Office Depot, meanwhile, compared the companies to a couple of penguins on a rapidly-melting iceberg. She argued that the two companies need to team up to keep Amazon at bay, since the Everything Store decided to go after office supply business more aggressively last year.
By Laura Northrup for www.consumerist.com
This week, the speculation about a merger between Office Depot and Staples, two office supply retailers, can all but officially be laid to rest. With hopes for a deal now dead and buried, what does the future hold for Office Depot’s stressed-out and toxic stock?
The intention for the merger was initially announced more than a year ago, on 4 February 2015. Behind the idea was activist-investing hedge fund Starboard Value. Starboard first pushed for a merger between Office Depot and its former competitor Office Max. Once Office Max had been bought out, Starboard then began to push for Stapes to purchase Office Depot.
The deal would have been worth $6-billion. But from the start, Starboard’s efforts have been stymied by regulatory agencies.
Back in December, the Federal Trade Commission (FTC) challenged the merger with violating antitrust laws in an administrative complaint. The case is slated to come before a judge in May of this year, but in the meantime the FTC has sought an injunction to block the merger.
By Kat McKerrow for www.thestreet.com
Staples chief executive says the retailer still hopes to overcome a government lawsuit blocking its takeover of rival Office Depot, even as the company prepares contingency plans to go it alone.
“We’ve been working on Plan B for several months at this point,” CEO Ron Sargent said in a conference call with analysts Friday, though he didn’t say how it might differ from Staples’ existing plan to close stores and expand its customer base. He says the office-supplies retailer is planning specific changes to improve its stand-alone performance “despite the fact that we’re focusing all our energies and efforts on getting this acquisition behind us.”
The assessment came after Staples reported fourth-quarter results that Sargent says fell short of management’s expectations. The company’s retail sales in North America dropped 5%, excluding newly opened and closed stores, as fewer shoppers visited its big-box stores. The chain has more than 1,900 locations around the world.
Sargent says the company has a plan to resume earnings growth this year after core earnings declined in 2015, though executives warned that sales will likely decline again in the current quarter.
Shares of Staples, which slid 2.7% to $9.60 on Friday, have fallen more than 40% over 12 months.
Staples has struggled with years of declining revenue as demand wanes for traditional office basics like folders and filing cabinets and as shoppers seek cheaper deals online. Managers last year pinned their hopes for a turnaround on a $6,3-billion combination with Office Depot designed to save on the operating costs from stores, distribution centres and executive offices. The cash-and-stock deal would be valued at about $5.2 billion at current prices.
The Federal Trade Commission in December sued to block the tie-up, saying it would result in higher prices and fewer options for big companies that buy office supplies in bulk. European officials signed off on the deal last month on the condition that Office Depot sheds its contract supply business and all its Swedish operations.
Staples in February also agreed to sell certain wholesale contracts, representing more than $550-million of annual sales, to Essendant Inc. for about $22,5-million if its Office Depot deal closes. The FTC has rejected Staples’ divestiture proposals.
The FTC in 1997 rejected Staples’ first attempt to buy Office Depot. But in 2013, the agency unconditionally approved Office Depot’s merger with OfficeMax, a move Sargent says should bolster the case for its new deal.
“Since 2013, competition has materially intensified, not lessened,” he says.
Even as it tries to add about 1 700 stores with the merger, Staples has been closing locations. In North America, the company closed 12 stores in the latest quarter, among 73 total closures last year. Staples says it expects to close about 50 North American stores in 2016.
Staples earned $86-million in the holiday quarter compared with a year-earlier loss of $260-million triggered by a write-down of the value of some of its international businesses. Overall revenue slipped 6,9% to $5,27-billion.
By Drew Fitzgerald and Joshua Jamerson for www.wsj.com
Staples and Office Depot have announced the completion of financing arrangements and the extension of their merger agreement from 4 February 2016 to 16 May 2016.
The extension allows for the completion of ongoing federal district court litigation with the Federal Trade Commission.
On 4 February, 2015, Staples and Office Depot entered into a definitive merger agreement to combine as a single company.
The combined company will be better positioned to provide value to customers, and compete against a large and diverse set of competitors. The company expects to deliver more than $1-billion of annualised synergies net of investments to provide increased value to customers by the third full fiscal year post-closing. The combined company will be better equipped to optimise its retail footprint, minimise redundancy, and reduce costs.
In connection with the proposed merger, Staples has filed with the SEC a registration statement on Form S-4 that includes a proxy statement of Office Depot that also constitutes a prospectus of Staples. Staples filed the final proxy statement/prospectus with the SEC on 18 May 2015.
The registration statement was declared effective by the SEC on 15 May 2015.
Office Depot mailed the definitive proxy statement/prospectus to stockholders of Office Depot on or about 19 May 2015, and the stockholders approved the transaction on 19 June 2015.
The registration statement and the proxy statement/prospectus contain important information about Staples, Office Depot, the transaction and related matters. Investors and security holders are urged to read the registration statement and the proxy statement/prospectus (including all amendments and supplements thereto) carefully.
After two years of store closures, layoffs have hit Staples headquarters.
The company has laid off hundreds of corporate employees, according to multiple sources familiar with the situation.
“It was a bloodbath,” says one source, who adds that pink slips were handed to both senior and junior employees.
Company spokesman Kirk Saville declined to confirm or deny the layoffs, instead referring Fortune to a press release announcing various leadership changes and that Staples SPLS was “streamlining its structure.”
That official announcement made no mention of widespread firings, nor or any specific departures beyond Demos Parneos, president of North American stores and online.
One person not affected is chairman and CEO Ron Sargent, who continues to fight Federal Trade Commission opposition to his company’s planned acquisition of rival Office Depot ODP .
Staples stock is down more than 7% so far in 2016, and down more than 50% from when the Office Depot deal was first announced last February. The company also has spent the past two years in a store closure process that was expected to affect at least 225 locations.
By Dan Primack for www.fortune.com
The Federal Trade Commission will not be changing its position on the acquisition of Office Depot by Staples, according to a report in the New York Post.
At a pre-trial hearing concerning the Staples-Office Depot merger, the US Federal Trade Commission stated that the offer by Staples to divest $500-million in commercial contracts was inadequate.
The US Federal Trade Commission (FTC) has challenged the proposed acquisition of Office Depot by Staples.