Shares of Staples, Inc. (NASDAQ:SPLS) and Office Depot Inc (NASDAQ:ODP) both plunged yesterday, dampened by renewed concerns that the FTC will block the two companies’ merger deal. Deborah Feinstein, the Head of the FTC’s Bureau of Competition, is against the deal.
The FTC commissioners will give their decision by October, though the company can ask for an extended deadline. The stock price of Staples declined as much as 5.83% percent to close at $12.75, recording its biggest intraday drop in nearly a month. Office Depot declined 4.08% to close at $6.64.
Anthony Chukumba of BB&T Capital Markets said that things are looking gloomy for the merger, but he doesn’t consider the fat lady has sung. A merger of Office Deport and Staples would leave the country with only one major office-supply chain, creating antitrust concerns.
The FTC has been assessing the impact of merger on large corporate clients. While consumers can buy pens and paper anywhere, there will be fewer options for entities that purchase products in large quantities and rely on discounted prices and steady deliveries. The most appropriate way for Staples is to divest a considerable portion of its delivery business.
Staples, Inc. (NASDAQ:SPLS) first reported its plans to acquire Office Depot in February 2015 for nearly $6 billion. As for its merger deal with Office Depot, the critics of the merger assert that the deal would result in higher prices and inflationary pressures for the corporate clients and consumers that the two companies cater to. It would lead in anti-competitive pressures in the office supplies segment, which might hinder performance of many small-cap office supplies firms.
Additionally, there was buzz on Monday that Staples provided a compensatory remedy to the FTC, which may include siphoning off a business to get the approval for the merger agreement. The company may depart its Office Max’s subsidiary unit, which provides services to corporate clients.