Staples and Office Depot said Tuesday that they are cancelling their planned $6.3 billion merger after a federal judge blocked the deal, saying the government had made the case that the combination would likely hurt competition in office supplies.
The Federal Trade Commission had sought to block the merger of the last two national office-supply chains, contending it would allow the new company to set the price of office supplies, especially for corporate customers that buy in bulk.
Under the terms of the merger agreement, Staples will pay Office Depot a $250 million “break-up” fee, the company said in a statement.
Debbie Feinstein, who heads the competition bureau at the Federal Trade Commission, said the ruling “is great news for business customers. This deal would eliminate head-to-head competition between Staples and Office Depot, and likely lead to higher prices and lower-quality service for large businesses that buy office supplies,” she said in a statement.
In December, the FTC rejected an offer from Staples to sell $1.25 billion in contracts to work around the competition issues.
Staples Inc., which is based in Framingham, Massachusetts, is the nations largest office-supply chain…. Office Depot Inc., which is headquartered in Boca Raton, Florida, is #2.
Founded in the late 1980s, both chains were among a group of chains led by Wal-Mart that opened thousands of supersized stores for shoppers wanting to buy in bulk. But changing shopping patterns, online sales, and demand for better price deals have hurt them.
Following news that the merger had been stopped, Office Depot’s stock dropped more than 26 percent in after-hours trading. Shares in Staples fell more than 10 percent.