Five years after the Federal Trade Commission put a stop to it, Staples Inc. is once again trying to buy its old competitor, Office Depot.
Staples has reportedly put up an offer of $2.1 billion for Office Depot’s parent company ODB Corp., totaling $40 per share. CNN Business noted that that price is about a 60% premium over the company’s average closing price over the last 90 trading days. However, it’s significantly less than the $6.3 billion agreed upon in 2015.
That year, the FTC ruled that the proposed merger would violate antitrust law, creating an entity that would dominate the office supply market. This time, Staples reportedly said that it is “prepared to take all necessary measures” to abide by FTC regulations.
Part of that plan entails selling its IT management company CompuCom and working directly with the ODP board to tailor a merger plan that fits within FTC confines. The Boston Globe also reported that Staples was even willing to allow ODP to divest its business-to-business operations to a third-party buyer.
Staples is once again proposing to buy rival Office Depot in a $2.1 billion deal, five years after the US government squashed their prior merger agreement https://t.co/5H9WHbQrd0
— CNN Breaking News (@cnnbrk) January 11, 2021
You might be thinking, “But how would Staples merging with Office Depot create some sort of monopoly when Amazon is running the show in just about every imaginable category, including office supplies?” Staples, apparently, is thinking the same thing.
In the last five years, Amazon has significantly grown its office supply sales, with its Amazon Business platform reaching $1 billion in annual revenue in 2016, the year after it launched. By 2018, that number reached $10 billion, and analysts predicted Amazon Business would surpass $30 billion by 2023.
That $10 billion in annual revenue two years ago puts Amazon on a playing field akin to ODP.
By that logic, Staples acquiring ODP makes it less of a monopoly and more of a direct competitor with Amazon Business.
The FTC and federal regulators might see things from Staples’ point of view and give their blessing. But, on a local level, smaller businesses are still fighting that same fight against big-box stores like Walmart, Target and Amazon.
Stacy Mitchel, co-director of the Institute for Local Self-Reliance advocacy group, told the Boston Globe that even creating a competitor to the Amazon monolith would still put smaller companies, which make up about a quarter of the office supply market, in jeopardy.
If the FTC is Staples’ and Office Depot’s only red tape to cut through, Amazon’s rise in the office supply category could be enough to sway regulators. The patience might even pay off significantly for Staples, too, if all it took was five years of waiting to get a steep discount on the acquisition price.
The years following the FTC ruling were tumultuous for Staples, with layoffs, major personnel changes, and even a time where its private equity owner, Sycamore Partners, reportedly wanted out. This could be necessary stability for Staples, which has made recent moves to expand its promotional products reach, too.
