Newspaper article THE JOURNAL RECORD

Feds Step in to Block Staples, Office Depot Merger

Newspaper article THE JOURNAL RECORD

Feds Step in to Block Staples, Office Depot Merger

Article excerpt

WASHINGTON -- The government moved to block a merger between office-supply giants Staples Inc. and Office Depot, arguing Monday that the $4 billion deal could make people pay more for paper, pens and other office and school supplies throughout the country.

The two companies -- between them they operate 1,124 stores -- contended the chain they envisioned would be a pencil-pusher's dream of efficiency and low prices.

In full-page newspaper ads they had promised shoppers: "When we join forces, our greater efficiency means even lower prices for you." But the Federal Trade Commission said the merged companies could control prices throughout the country. On a 4-1 vote, the commission decided to seek a court order before Thursday that would put the deal on hold while it is investigated. "The fact is that in those communities where Staples faces competition from Office Depot, prices are significantly lower than where it does not," said William J. Baer, director of the FTC's bureau of competition. Todd Krasnow, Staples executive vice president of marketing, said Staples will vigorously contest the FTC's request for a temporary injunction. The two companies said they account for only 5 percent to 6 percent of the $185 billion office-products market. "We've made a promise to consumers that prices will go down, which is why we're disappointed in the ruling by the FTC," Krasnow said. Staples, based in Framingham, Mass., announced last September it would acquire Delray Beach, Fla.-based Office Depot for about $3.5 billion in stock. The value of the deal has increased to about $4 billion since then as Staples stock has risen. Trading in the stock of both companies was suspended briefly after the FTC announcement Monday. When trading resumed, the value of both companies' stocks fell -- Office Depot by 24 percent, Staples by 5 percent. Shoppers interviewed outside a downtown Washington Staples store Monday disagreed about whether they would benefit from the deal. "They're going to force the prices (up) because I don't have any other option. They carry things that most other little stores don't carry. It's not good," said Azadeh Sefidroo, 43, who works as a consumer banker for NationsBank. …

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