Staples, Office Depot Can't Survive FTC Trial Delay, Lawyer Says

  • Takeover bid hinges on injunction hearing in federal court
  • Companies consent to court-ordered halt, but only for fighting

Staples Inc.’s proposed takeover of Office Depot Inc. will collapse if the companies are forced to delay their deal to face a government challenge in the Federal Trade Commission’s in-house court scheduled for May, a lawyer said.

The FTC, which says the merger is anticompetitive, is asking a federal court judge in Washington to stop the transaction from closing pending that trial. Matt Reilly, an attorney for Office Depot, said during a court hearing Tuesday that the company is "in limbo" and that going through a drawn-out administrative process isn’t an option if the judge rules against them.

"This merger cannot survive" the FTC process, Reilly said. That means a ruling against the companies will kill the merger. The companies agreed not to close until the judge decides on the FTC request.

Both sides appeared before U.S. District Judge Emmet Sullivan a day after the FTC sued Staples and Office Depot, claiming their $6.3 billion tie-up threatens to raise prices for corporate customers of office supplies. Diane Sullivan, a lawyer for Staples, estimated the federal court hearing will last about two weeks.

The judge, who was presiding over a U.S. lawsuit seeking to block Electrolux AB’s takeover of General Electric Co.’s appliance business when GE abandoned the deal, encouraged Staples, Office Depot and the FTC to try to negotiate a settlement.

The office-supply companies said they offered to divest more than $500 million in commercial contracts to resolve antitrust concerns. Sullivan, the Staples lawyer, said at the hearing that the companies didn’t receive a counteroffer from the agency.

The case is Federal Trade Commission v. Staples Inc., 15-cv-2115, U.S. District Court, District of Columbia (Washington).

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