Staples is back on the negotiation table with rival Office Depot. This time around, the American office retail company is considering acquiring Office Depot five years after talks broke down on their merger deal due primarily to the intervention of the US government, USA Today reports.
Staples said it was offering a $40 per share price for Office Depot’s parent company, ODP Corporation, which is about a 60% premium over the company’s closing price within the last 90 trading days. Staples announced the deal would be an all-cash transaction, calling on Office Depot to accept what it termed a compelling value proposition. Staples asserted that its offer was more than the actual value of Office Depot.
Staples became a private company about three years ago when it sold to Sycamore Partners, a private equity firm in New York, specializing in leveraged and distressed buyouts.
Staples announced that this time around, it was going to do all it takes to get the merger approved by the relevant regulators. The Federal Trade Commission had blocked the proposed deal by Staples in May 2016, saying the success of such a deal would give the emerging company a monopolistic hold on the office supply retail market, which went against antitrust laws, CNN writes.
However, to beat antitrust laws, Staples is considering putting up its IT management company CompuCom for sale. It may also give up its business-to-business unit. After offloading its other businesses, Staples said it might have the wherewithal to increase its proposal price.
Staples said that it had the resources to finance the transaction and that its insistence on going ahead with the transaction is not subject to financial contingency. The entire regulatory process could take up to six months, according to estimates by Staples. The company also told ODP’s board to go along with the regulatory authorities when they come knocking.
Office Depot confirmed in a statement that it had received Staples’ proposal and that its board was taking a look at the acquisition proposal. While Staples had offered to purchase Office Depot for $6.3 billion in 2016, the company is offering $2.1 billion in 2021.
Monday’s proposal will become just the third time in about 25 years that both companies have tried to merge. The first proposal came in1997, which was also blocked by the government. Over the years, the office supply retail industry has become quite competitive for Staples and Office Depot, with both companies facing increasing competition from smaller retail stores.