Staples announced that on May 16, 2016, the company and Office Depot 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.
- 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 (ESND) 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. We believe that it is in the best interest of our shareholders, customers, and associates to forego appealing this decision, terminate the merger agreement, and move on with our strategic plan to drive shareholder value. We are positioning Staples for the future by reshaping our business, while increasing our focus on mid-market customers in North America and categories beyond office supplies.'
The company announced a strategic plan to enhance long-term value including the following actions:
- The company is focused on increasing its share of wallet with existing customers and acquiring new customers. The company is increasing its offering of products and services beyond office supplies. Staples 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.
- The company generated approximately $750 million of annualized pre-tax cost savings from 2013-2015 by evolving business processes, increasing productivity, and developing more efficient ways to serve customers. 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 will continue to return excess cash to shareholders. The company remains committed to its dividend program. Staples plans to resume repurchasing its common stock through open-market purchases during the second quarter of 2016. The company expects share repurchases of approximately $100 million in 2016.