Staples Works to Avoid Antitrust Difficulties
Five years after a merger was blocked by the United States government, Staples has once again offered to purchase Office Depot (ODP) in a $2.1 billion deal. Staples is offering $40 per share in an all-cash transaction that values the company 60% higher than its average closing price for the last 90 trading days. Shares of Office Depot’s parent company ODP Corp. rose 10% in premarket trading on the news.
In an effort to avoid antitrust roadblocks this time around, Staples suggested it could sell its IT management company, CompuCom, or its business-to-business arm. Staples estimates the regulatory process will take roughly six months.
Staples’ History of Halted Mergers and Sales
The proposed price Staples has offered to Office Depot is roughly one third of what the company proposed in 2015, when it put a $6.3 billion offer on the table. In 2016, after the Federal Trade Commission opposed the merger, Staples and Office Depot called it off. The FTC argued at the time that a merger would give the combined company too large a share of the office supply retail market and violate antitrust law.
Staples went private the next year in a sale to private equity firm Sycamore Partners. The sale was inked at $6.9 billion—a steep drop in value for the office retailer, which was valued at $19 billion in 2010.
Why the Merger Matters
This latest purchase offer marks the third time in the past quarter century that Office Depot and Staples have attempted a merger. The companies first tried to join forces in 1997.
Both companies have struggled in recent years under increased competition from retailers like Amazon (AMZN) and Walmart (WMT). Changing shopping habits have led more and more consumers to purchase office products from non-traditional office supply retailers. Investors will be curious to see if this latest attempt at joining forces will be a success for Staples and Office Depot.
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