Regulators Set to Block Staples-Office Depot Deal

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Antitrust regulators in the United States are set to block Staple’s Inc (SPLS) merger with Office Depot Inc (ODP), according to the New York Post. Federal regulators who are scrutinizing the $6 billion deal fear that a merger will create a single nationwide office supply company to serve government and corporate clients.

The FTC (Federal Trade Commission) has until December 8 to decide whether to block the deal. The agency may also decide to delay its decision once again in order to extract more concessions from Staples, who reached their deal with Office Depot and mid-February.

It is believed that two out of the four commissioners oppose the deal, which would make the vote 2-2. In a deadlocked vote, the FTC does nothing.

To get the vote, Staples will need to swing one of the two opposing commissioners to its side. This will be no easy task.

The FTC’s primary concern is that Office Depot and Staples are the only two office suppliers that serve corporate customers on a national level. One estimate states that both companies handle all Fortune 1000 office supply contracts.

Staples has approximately 1,200 stores which generate $9.6 billion in sales. The company’s commercial business produces nearly as much revenue, which is estimated to reach a $8.4 billion this year.

To ease regulator concerns, Staples has offered to transfer backend contracts worth about $600 million to Essendant, an office supply wholesaler. Nevertheless, the contracts would not turn Essendant into a nationwide supplier, which is the primary concern the FTC has with the merger.

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