Staples/Office Depot deal awaits FTC action

Office Depot shareholders approved of the company’s acquisition by Staples in a vote that will prove to be largely symbolic if federal regulators determine a deal involving two direct competitors is not in the best interest of consumers.

Office Depot agreed to be acquired by Staples on Feb. 4 and on June 19 a preliminary vote total showed that 99.5% of shareholders approved of a deal that involves them receiving $7.25 in cash and 0.2188 of Staples stock for each share of Office Depot stock.

The company said in a statement that the transaction is expected to close by the end of the calendar year, but also acknowledged it is subject to customary closing conditions, including antitrust regulatory approval.

Approval from the Federal Trade Commission may eventually come, but most likely not without some significant strings attached. Office Depot acquired OfficMax less than two years ago and now the combined company’s acquisition by Staples would consolidated the office products retailing channel into one pure play competitor.

Even Dollar Tree was forced to divest more than 300 Family Dollar stores to secure regulatory approval of its acquisition of the company and Dollar Tree and Family Dollar operate vastly different business models. Staples has previously touted approval from regulators in New Zealand and China, where the competitive landscape looks very different, as if to imply that approval from U.S. regulators may follow suit.

“The company is working closely with regulatory agencies to seek outstanding antitrust clearances and expects the transaction to be completed by the end of the year,” Staples said in a statement expressing its pleasure that Office Depot shareholders overwhelmingly approved the transaction.

"The combined company will allow us to provide more value to customers and more effectively compete in a rapidly evolving environment,” said Ron Sargent, Staples chairman and CEO.

The evolving nature of the competitive landscape, essentially the rise of e-commerce, as a means to justify the pending acquisition is a case Staples has made previously. However, that doesn’t mean the FTC will buy the argument.

When Staples first attempt to acquire Office Depot was scuttled by the FTC in 1997 it was based on an evaluation of the companies overlapping store networks and a narrow view of the competitive set within the office products world.