OFFICE COMBO KIBOSH
Staples deal dead
Staples’ top hired gun took a risky $6 billion shot that badly backfired and killed its deal for rival Office Depot.
During the legal showdown with government regulators suing to block the $6.3 billion deal, Staples’ trial lawyer Diane Sullivan told the judge that the agency had failed to meet the burden for blocking the deal and declined to present evidence in support of the merger.
Washington federal Judge Emmet Sullivan halted the deal on Tuesday, a victory for the Federal Trade Commission, which had argued that combining the two biggest US office suppliers would harm customers.
“After considering the extensive record and the parties’ legal arguments, the court finds that plaintiffs 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,” Sullivan (no relation) wrote in his decision.
Staples fell 10 percent in after-hours trading before being halted, while Office Depot plunged 26 percent.
The outcome of the case had been too close to call for Wall Street, with shares of Office Depot swinging wildly ahead of the judge’s ruling, which came after the close of markets.
Sullivan and her team at Weil Gotshal argued that the combined company would be better able to compete with Amazon’s relatively new business unit and that the company would pass on lower prices to consumers.
Defense attorneys told the judge that the FTC had failed to prove its position and rested their case without calling any witnesses to argue for the benefits of the merger. Only lawyers stood and made that argument in court.
“It cost them,” said one antitrust lawyer who has been closely following the case. “They just misread the judge.”
The two office supply giants called off the deal rather than keep fighting. Staples will pay Office Depot a $250 million breakup fee.
Staples might have won had it presented a defense considering how the case was going, the lawyer said.
Judge Sullivan criticized the FTC for leading witnesses and trying to make a closing presentation without first presenting it as evidence.
He also questioned why the FTC did not include ink and toner when defining the office supplies market.