Staples, Office Depot call off $6.3B merger

WASHINGTON — Staples and Office Depot are scrapping their planned $6.3-billion merger after a U.S. judge blocked the deal, saying the government had made the case that the combination would likely hurt competition in office supplies.

The Federal Trade Commission had sought to block the merger of the last two national office-supply chains. It contended the deal would allow the combined company to dictate the price of supplies, especially for corporate customers that buy in bulk.

U.S. District Judge Emmet Sullivan said in a ruling the FTC met its legal burden by showing it was likely the Staples-Office Depot merger would “substantially impair competition in the sale and distribution of consumable office supplies to large business-to-business customers.” Regulators also succeeded in showing that blocking the deal would be in the public interest, he said.

The two companies said they will not appeal Sullivan’s ruling.

Debbie Feinstein, who heads the competition bureau at the FTC, said the ruling “is great news for business customers.”

“This deal would eliminate head-to-head competition between Staples and Office Depot, and likely lead to higher prices and lower-quality service for large businesses that buy office supplies,” she said.

In December, the FTC rejected an offer from Staples to sell $1.25 billion in contracts in a bid to work around the issues.

Staples, based in Framingham, Massachusetts, is the largest big box office-supply chain. Office Depot, headquartered in Boca Raton, Florida, is No. 2. Founded in the late 1980s, they were among a group of chains led by Walmart that opened thousands of supersized stores for shoppers wanting to buy in bulk. But changing shopping patterns, like the demand for price deals and the move toward shopping online, have hurt them.

Staples and Office Depot both said they were disappointed by the outcome but are moving on with new business strategies.

“We are positioning Staples for the future by reshaping our business, while increasing our focus on mid-market customers in North America and categories beyond office supplies,” Staples chairman and CEO Ron Sargent said in a statement.

Roland Smith, Office Depot’s chairman and CEO, said: “We look forward to re-energizing our business.”