The revised $5.5 billion bid from Staples to purchase their arch rival Office Depot was rejected by the United States Federal Trade Commission. This has prevented Staples’ most recent attempt to establish a more powerful corporation that would be able to better contend with an ever-changing office supplies market.
In an effort to work around the FTC’s disapproval of the deal, Staples offered to sell $1.25 billion worth of commercial contracts. However, this was ultimately not enough to convince the FTC from approving the megadeal.
Earlier this month the FTC filed a lawsuit in order to block the deal from taking place. Staples has not yet made a counteroffer, but the company is still planning to continue negotiations. Staples will also be taking the route of litigation, as an administrative trial on the deal is scheduled to begin on May 10 of next year.
The FTC said two weeks ago that it would block such a deal, claiming that it would essentially destroy any sort of competition for the consumable office supply industry. Staples had originally announced its intentions to purchase Office Depot in February. Two years ago, Office Depot purchased OfficeMax, reducing the big three in the office supplies industry to the big two. Sales for these companies have been in decline because of the presence of major retailers like Amazon and Walmart.
Staples had hoped that the presence of these massive retailers would have caused the FTC to put aside concerns of antitrust violations. The proposed merger between Staples and Office Depot would have involved a $4 billion cash and stock component. When first announced, the deal was worth about $6.3 billion, though it has since fallen because of a decline in the value of shares for Staples.
Last year, Staples announced its intentions to close hundreds of North American stores. The merger between Staples and Office Depot isn’t the only merger that has been recently rejected by the FTC. The trading commission also rejected a merger between tuna companies Bumble Bee and Chicken of the Sea. Additionally, the FTC prevented General Electric from selling its home appliances unit to Electrolux.
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