Staples, Office Depot Shares Plunge After FTC Votes To Block Proposed Deal

RTR4O9BR — A shopping cart is seen outside a Staples office supplies store in the Chicago suburb of Glenview, Illinois, February 4, 2015. Federal antitrust regulators want to stop Staples Inc., the No. 1 U.S. office supplies retailer, from buying No. 2 Office Depot Inc. in a $6.3 billion deal designed to help it better compete against Wal-Mart Stores and Amazon.com. Reuters/Jim Young

Shares in Staples and Office Depot plunged Monday after U.S. antitrust regulators moved to squash efforts to bring together the nation’s two largest office supply retailers. The merger attempt, first announced in February, drew immediate scrutiny from U.S. and European regulators and ignited speculation that the deal would be challenged.

“The Commission has reason to believe that the proposed merger between Staples and Office Depot is likely to eliminate beneficial competition that large companies rely on to reduce the costs of office supplies,” FTC Chairwoman Edith Ramirez said in a statement. “The FTC’s complaint alleges that Staples and Office Depot are often the top two bidders for large business customers.”

Staples Inc. (Nasdaq:SPLS) shares dropped 13.75 percent to $10.66 while Office Depot Inc. (Nasdaq:ODP) stock dropped 15.75 percent to $5.59 on Monday.

The proposed merger would leave just one office supply retailer with a brick-and-mortar presence. This is the second time in 20 years that antitrust officials have said the tie-up should be blocked because it limits competition, Bloomberg reported. Two years ago the agency approved Office Depot’s merger with Office Max, citing ample competition from Amazon.com, or big-box retailers like Walmart, the report said.

Staples Inc. (SPLS) | FindTheCompany

But in this case, the FTC is concerned the merger would put too much of the business-to-business side of the office supply environment under the control of one company.

Both companies said Monday they would challenge the FTC on the grounds the move is aimed at bolstering their positions against other major office supply retailers, including Target, Walmart, and online vendors, especially Amazon.com.

“This merger creates an unparalleled opportunity to better serve customers of Staples and Office Depot,” Ron Sargent, Staples’ chairman and chief executive officer, said in a statement. “The combined company would generate significant savings, and we’re committed to investing savings in lower prices for all customers.”