A federal judge yesterday blocked the merger of Staples (SPLS) and Office Depot (ODP) on the basis of the proposed merger’s ability to negatively affecting the competition that characterizes office supply. According to a report from Washington, the proposed merger worth $6.3 billion has been blocked by a federal judge following government’s call for the scrapping of the deal. The government made the call after it feared the merge would negatively impact the competition that is associated with office supplies.
The Federal Trade commission contended to block the deal for fear of the merger’s ability to command the price of supply. In particular, the commission expressed concern over the merger’s potential to command the prices of supplies for customers such as those in the corporate world that are used to buying supplies in bulk. The decision to block the deal has since seen off all the potential investors.
Speaking after the hearing of the ruling, Debbie Feinstein who is the leader of FTC’s competition bureau said that it was great news for the entire community of players within the office supplies business including suppliers and customers. “The deal will definitely obliterate competition between the two companies, a result which will definitely culminate into higher market prices and services of low quality especially for large businesses that buy office supplies in bulk,” she said in great satisfaction.
The news of the scuttling of the deal was received with gloom by most traders leading to a huge slump in Staple and Office Depot shares. According to the trading reports of Tuesday, the Office Depot and Staples registered losses of at least 26 % and 10 % respectively.
Presiding over the case was Emmet Sullivan, a US District judge who also expressly indicated that the ruling was fair and is a clear reflection of the FTC’s interest in satisfying the market players and the general members of the public. “The jury arrived at the decision to quash the deal because such a merger would have impaired competition in the office supplies market to a very significant extent,” he said as stated the ruling.
Based on the net worth of the deal, almost all business experts expected the representatives of the two companies to make a formal appeal against the ruling. But, the representatives of both companies have said that they will not appeal against the ruling, a decision which has sent shock waves across the entire business fraternity.
Must read: Macy’s Stocks Tank Over Low Sales
In spite of their decision to refrain from appealing against the ruling, the two businesses blatantly pointed out that they were disappointed with all the figures that had spearheaded the blocking of the deal. They still stated that they will go on with business despite the development which will require them to go back to the drawing board. “We are interested in positioning Staples for the future market by re-sizing our business while channeling our energy and attention to North America based customers and categories whose boundaries extend past office supplies,” said Ron Sargent, who is the CEO and chairman of Staples.