Published On: Fri, Feb 6th, 2015

Staples Renewed Bid to Buy Office Depot: It’s Not 1 Stapler But 10, 000 Staplers

The Staples bid for Office Depot might be approved by the FTC if it is good for corporate customers

Office Depot

Staples is making yet another attempt to take over rival Office Depot with a $6.5 billion bid after the tie up was rejected by the FTC in 1996.

A merger may be expected to pass muster with regulators this time, because there are many more competitors on the scene for office supplies, so the threat that the buyout will be anti-competitive is less compelling.

Office Depot, founded by Bernie Marcus, who retired in 2002 to pursue philanthropic projects, is emphasizing that there is sufficient competition in the industry. On conference calls, a company’s management doesn’t usually mention competition as a good thing, but CEO Ron Sargent said on a conference call that there are a number of competitors; emphasizing this point might make the FTC more amenable to a merger.

Sargent said, according to the Wall Street Journal “There are really strong regional players who bid on contracts all the time and have been very, very successful.”

However, the issue this time around may not be where the average customer is going to buy a stapler, but where a corporate customer is going to purchase thousands of them; for companies, there are fewer options, as Amanda Wait, a former FTC litigator, told WSJ, “This investigation is not going to be about where I can buy a stapler, but but where a company can buy 10, 000 staplers.”

The merger between Office Depot and OfficeMax may provide an advantage and a disadvantage. On the one hand, the 2013 merger sets a precedent. If the FTC finds that prices have not risen appreciably since the merger, that could be an argument in favor of the merger between Staples and Office Depot. However, it doesn’t necessarily address the issue of corporate customers and a merger between Staples and Office Depot will leave only one major office supply player in the space, a situation that may make some uneasy.

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