Staples Inc. will purchase Office Depot Inc. for an equity value of approximately $6.3 billion ($11 per share), reducing the country's office supply industry to a single major chain.
"This is a transformational acquisition which enables Staples to provide more value to customers, and more effectively compete in a rapidly evolving competitive environment," Staples Chairman and Chief Executive Officer Ron Sargent said in a statement, according to The Verge.
"We expect to recognize at least $1 billion of synergies as we aggressively reduce global expenses and optimize our retail footprint. These savings will dramatically accelerate our strategic reinvention which is focused on driving growth in our delivery businesses and in categories beyond office supplies."
Although many analysts are expecting that the deal will be scrutinized by the Federal Trade Commission (FTC), given the monopolistic character of the purchase, competition from online retailers already selling office supplies in mass is likely to serve as a main argument bolstering the merger.
In 2013, the FTC approved the merger of OfficeMax and Office Depot, which were then the second and third place leaders within the industry. Now attention rests on the decision of the FTC and their ruling on Staples dominating the office supply market.
"The FTC's key question likely will be whether there is anything special about competition from office-supply superstores, such that reducing the number of competitors in that channel to one will result in higher prices to at least some consumers for at least some prices," Amanda Wait, a former FTC lawyer who is now a partner at Washington-based Hunton & Williams LLP, told Bloomberg Businessweek.
If the merger is approved, the deal is expected to close by the end of the financial year and will allow Office Depot shareholders to get $7.25 in cash and 0.2188 of a share in Staples stock at closing.
