Staples purchase of Office Depot not easy, EU investigates

Staples' (NASDAQ:SPLS) planned $6.3 billion acquisition of Office Depot (NASDAQ:ODP) has come under scrutiny by European Union regulators, who have launched a detailed investigation into the deal.

The purchase follows Office Depot's 2013 acquisition of OfficeMax, and would lead to only one office supply superstore chain in the United States. Regulators in the U.S., Europe and Canada have not yet approved the deal. The EU has said it will make a decision by Feb. 10, 2016, while Staples expects the deal will close by the end of this year despite opposition by U.S. regulators, The Wall Street Journal reported.

"All companies and organizations, big or small, need office supplies for their daily work," Margrethe Vestager, the EU's antitrust chief, said in a statement. "We are opening this in-depth investigation to make sure that the merger of two of the main suppliers of office products will not have a negative effect on competition."

A preliminary investigation by EU regulators indicated that competition might be harmed in the business-to-business market for office products and supplies. Staples, Office Depot and the biggest European competitor, Lyreco, are the main suppliers of office products to business market customers, regulators said.

"The transaction could eliminate an important competitor and reduce the choice of suitable suppliers in already concentrated markets, which could lead to price increases," according to the European Commission, the EU's top antitrust authority. The European Commission also noted potential concerns regarding the wholesaling of office products in Sweden, "where the merging parties appear to have no significant competitors offering a wide portfolio of products."

Staples' CEO Ron Sargent said in a statement that the company was working "cooperatively" with EU regulators. The deal would "enable Staples to better serve customers around the world and to compete in a rapidly evolving global marketplace," he said.

The deal has been approved by regulators in Australia, New Zealand and China, according to Staples.

For more:
-See this article in The Wall Street Journal

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