Office Depot and Staples Call Off Merger Plans After District Court's Ruling

Posted on May 15, 2016

Office Depot, Inc. has announced it has called off its planned merger with Staples after the U.S. District Court in the District of Columbia granted the Federal Trade Commission's request for a preliminary injunction. The companies have decided not to pursue the merger following the court's ruling.

Office Depot Chairman and CEO Roland Smith says in a statement, "While we are respectful of the Court’s decision to grant the FTC’s request for a preliminary injunction to prevent our merger with Staples, we are disappointed by this outcome and strongly believe that a merger would have benefitted all of our customers in the long term. We do not intend to appeal the Court’s decision and the two companies plan to terminate the merger agreement effective May 16, 2016."

Smith says the company will now focus re-energizing the business and capitalizing on the Office Depot and OfficeMax integration. Smith says, "As the Staples merger process comes to an end, we look forward to re-energizing our business. We remain committed to delivering our 2016 Critical Priorities and realizing the remaining synergies and efficiencies that come from the integration of Office Depot and OfficeMax. Once the Staples merger agreement is formally terminated, we plan to host an investor conference call on May 16 to discuss next steps in our go-forward strategy."

The Sun-Sentinel reports that the court said in its ruling, "The Court finds that [the FTC and related parties] have met their burden of showing that there is a reasonable probability that the proposed merger will substantially impair competition in the sale and distribution of consumable office supplies to large business-to-business customers."

The FTC says the merger would have resulted in higher prices for businesses. Debbie Feinstein, the Federal Trade Commission's Bureau of Competition director, says, "The deal would eliminate head-to-head competition between Staples and Office Depot and likely lead to higher prices and lower quality of service for large businesses that buy office supplies."

The merger may very well have resulted in higher prices for office supplies. The merger might also have helped the office supply retailers in a retail environment that has many brick-and-mortar retailers struggling. The office supply space is also changing as these types of retailers have also become gadget retailers. The companies will now continue to have to battle each other as well as Internet sellers of office supplies, such as Amazon.com.