Staples And Office Depot Terminate Merger Agreement After Judge's Ruling

(RTTNews) - Staples, Inc. (SPLS) said that on May 16, 2016, the company and Office Depot, Inc. (ODP) plan to terminate their merger agreement following U.S. District Court for the District of Columbia's recent ruling granting the Federal Trade Commission's request for a preliminary injunction to block the acquisition.

SPLS closed Tuesday's regular trading at $10.36,up $0.06 or 0.58 percent. However, in the after-hours trade, the stock dropped $1.05 or 10.14 percent.

ODP closed Tuesday's trading at $6.09, down $0.17 or 2.72 percent. In the after-hours trade, the stock further declined $1.60 or 26.27 percent.

Under the terms of the merger agreement, Staples will pay Office Depot a $250 million break-up fee. Staples also plans to terminate its agreement to sell more than $550 million in large corporate contract business and related assets to Essendant in connection with the termination of the Office Depot merger agreement.

"We are extremely disappointed that the FTC's request for preliminary injunction was granted despite the fact that it failed to define the relevant market correctly, and fell woefully short of proving its case," said Ron Sargent, Staples' chairman and chief executive officer.

Roland Smith Chairman and Chief Executive Officer of Office Depot, said, "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."

Staples is increasing its offering of products and services beyond office supplies. it also plans to pursue market share gains in core categories like office supplies, ink, toner and paper. To support its growth plans, the company will invest in lower prices and improved supply chain capabilities and add more than 1,000 associates to its mid-market sales force. Staples will also pursue acquisitions of business-to-business service providers and companies specializing in categories beyond office supplies to build scale and credibility and accelerate growth in these areas.

Staples plans to explore strategic alternatives for its European operations. This will allow the company to sharpen its focus and more aggressively pursue its mid-market growth strategy in North America. Staples has closed more than 300 of its stores in North America since 2011. The company plans to close at least 50 stores in North America in 2016.

Staples is initiating a new multi-year cost savings plan which is expected to generate approximately $300 million of annualized pre-tax cost savings by the end of 2018. The company will primarily focus on reducing product costs, optimizing promotions, increasing the mix of Staples Brand products, and reducing operating expenses.

Staples plans to resume repurchasing its common stock through open-market purchases during the second quarter of 2016. The company expects share repurchases of about $100 million in 2016. The company remains committed to its dividend program.

Office Depot, 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."

Separately, Essendant Inc. (ESND) confirmed that its previously announced acquisition from Staples, of wholesale contracts with minority and woman-owned office supply resellers and their large corporate customers representing sales of more than $550 million annually, will not close. The acquisition was contingent on the merger between Staples and Office Depot, Inc., which was preliminarily enjoined on antitrust grounds by a U.S. district court judge's ruling on May 10.