NEW YORK, N.Y. – Staples has received European approval for its buyout of Office Depot and in exchange, it said Wednesday that it would split off some operations in Europe to allay monopoly fears.
The company will divest all of Office Depot’s operations in Sweden, as well as European retail, contract, online and catalogue operations in an agreement with the European Commission.
But the $6.3 billion still needs approval in Canada at home in the U.S., which is far from assured.
U.S. regulators in December rejected Staples’ offer to sell $1.25 billion in contracts to work around anti-trust issues. The Federal Trade Commission believes that the combination of the last two major office supply retailers would throttle competition and allow the new company to dictate the price of supplies.
Staples and Office Depot Inc. recently extended this week’s deadline to complete the deal by more than three months, to May 16, giving it more time to argue its case.
“The acquisition has been approved in Australia, New Zealand, China, and Europe,” said Staples Chairman and CEO Ron Sargent. “Regulatory agencies around the world understand that this acquisition will allow Staples to provide increased value and service to customers of all sizes. We look forward to a full, impartial judicial review in the United States.”
The office supply sector has been upended by technological changes in the work place, as well as a slow economic recovery. The industry had already undergone a notable consolidation with the merger three years ago of Office Depot, based in Boca Raton, Florida, and OfficeMax.
Office Depot and Staples now say that competition, with the arrival of major online operators like Amazon.com, has become even more severe, and that the FTC is contradicting itself because it said that the office supply market was highly competitive only three years ago.
Shares of both companies have plunged 50 per cent this year as companies clamp down on spending and continue to migrate to a more digital work place.
Staples Inc., based in Framingham, Massachusetts, said that it is still willing to negotiate with the FTC and that it may pursue legal action to close the deal.
Shares of Office Depot Inc. and Staples both rose sharply in premarket trading.