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Staples-Office Depot: Another Merger Bites the Dust

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Staples-Office Depot merger officially breaks

On May 10, the U.S. District Court in the District of Columbia granted a preliminary injunction to the Federal Trade Commission’s request to block the merger of Staples (SPLS) and Office Depot (ODP). This is the second time that the companies tried and failed to merge. The first time was nearly 20 years ago in the late 1990s before the antitrust community understood what the Internet would do to competition in the retail sector.

Ronald Smith, Office Depot’s chairman and CEO, discussed the decision.

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He said that “While we are respectful of the Court’s decision to grant the FTC’s request for a preliminary injunction to prevent our merger with Staples, we are disappointed by this outcome and strongly believe that a merger would have benefitted all of our customers in the long term. We do not intend to appeal the Court’s decision and the two companies plan to terminate the merger agreement effective May 16, 2016.

He also said, “As the Staples merger process comes to an end, we look forward to re-energizing our business. We remain committed to delivering our 2016 Critical Priorities and realizing the remaining synergies and efficiencies that come from the integration of Office Depot and OfficeMax. Once the Staples merger agreement is formally terminated, we plan to host an investor conference call on May 16 to discuss next steps in our go-forward strategy.”

This deal was always a long shot. The spread was always wide. The Obama administration is getting tougher on antitrust enforcement. We can add Staples-Office Depot to the list of other broken deals for 2016—like Baker Hughes (BHI) and Halliburton (HAL) or Pfizer (PFE) and Allergan (AGN). Investors who are interested in trading the retail sector should look at the S&P SPDR ETF (XRT) or the Vaneck Vectors Retail ETF (RTH).

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