Staples CEO Ron Sargent said Friday that the retailer is working on a “Plan B” in case it isn’t able to prevail in its merger plans with rival Office Depot.
Sargent told analysts in a conference call that the retailer still hopes that the Federal Trade Commission will relent and allow the acquisition to go forward. Last week the office supplies retailer reported quarterly results that missed expectations.
The FTC filed a motion in December to block the merger, on the grounds that there are antitrust concerns over the business contracts segment.
In December, after the FTC filed a federal complaint in court to block the proposed $6.3 billion Staples/Office Depot merger over antitrust concerns in the corporate contracts business, Staples said it would appeal the decision and offered to divest itself of a chunk of its business.
Rather than the actual retail business, the business supplies side emerged to trip up the deal. Antitrust watchdog advocates raised the issue over the summer, urging the FTC to take a close look, and, though resolved, European regulators had similar concerns.
“The Commission has reason to believe that the proposed merger between Staples and Office Depot is likely to eliminate beneficial competition that large companies rely on to reduce the costs of office supplies,” FTC chairwoman Edith Ramirez said in a December statement. “The FTC’s complaint alleges that Staples and Office Depot are often the top two bidders for large business customers.”
Speaking on a conference call Friday, Sargent said the FTC has “an incredibly narrow” definition of Staples’ office-supply business, adding that Staples has been mulling contingency plans for several months in case the Office Depot deal is blocked, including boosting sales of non-office supplies and shuttering more stores. “Our commitment to the acquisition hasn’t changed. Our top priority is to get the deal done,” Sargent told analysts, the Boston Herald reports.
Boston College law professor Brian Quinn, a mergers and acquisitions expert, told the Boston Globe in December that Staples would more likely end up dropping the matter and move on.
“It could take years to litigate this,” Quinn said. “They have too many other things they can do with their money.”