This Could be a Big Snag for a Staples and Office Depot Merger

Staples Begins Recyling Electronics To Tackle "E-Waste"
(Photo by Tim Boyle/Getty Images)
Photograph by Tim Boyle — Getty Images

Regulators are reportedly getting ready to block Staples’ offer to buy Office Depot in a deal originally valued at $6.3 billion.

The news, first reported by the New York Post, sent shares of Staples (SPLS) and Office Depot (ODP) lower in recent trading.

The Post, citing sources familiar with the matter, said the Federal Trade Commission was uneasy about the Staples-Office Depot because it would be the sole nationwide office supply provider to corporations and the government. Other media publications have also reported that the FTC’s concerns centered less on the retail market and more on corporate clients.

A Staples representative wasn’t immediately available to comment on the report, while an Office Depot spokesperson declined to comment.

The deal to combine Staples and Office Depot was announced in early February and would result in a retailer with pro forma annual sales of about $39 billion. The companies, which had been in talks to merge in September 2014, would be a stronger rival to confront the threat from (AMZN) and Walmart (WMT) in addressing the consumer market for printers, paper supplies, and other office products.

The commission already successfully blocked a merger between Staples and Office Depot in 1997, arguing at the time that the combined company would substantially hurt competition at the retail level. But the FTC signed off on the 2013 merger between Office Depot and OfficeMax, acknowledging the market for consumer office supplies has changed significantly since 1997.

Last month, Staples and Office Depot announced a mutual agreement with the FTC to extend the review period for the deal. The FTC agreed to issue a decision regarding the transaction by Dec. 8.

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