Fate of Staples-Office Depot merger hinges on judge's ruling today

The fate of the Staples-Office Depot merger should come into focus today, ending a long and uncertain wait for about 2,000 employees of Office Depot's headquarters in Boca Raton.

A U.S. District Court judge is expected to announce whether he'll halt Staples' $6.3 billion acquisition of its office retail rival. The decision on the Federal Trade Commission's request for a preliminary injunction will determine whether Staples moves forward in the merger. Staples has previously said it would walk away if the injunction is granted.

Local leaders will be paying close attention.

"We are anxious to hear," said Kelly Smallridge, president of the Business Development Board of Palm Beach County. "If the deal goes through, we stand ready to work with Staples. If the deal does not go forward, we will remain available to help Office Depot keep their presence in Boca Raton and address any challenges."

Boca Raton Mayor Susan Haynie said if the merger doesn't go through, "we'll be grateful." But if it does, "we're hopeful [Staples-Office Depot] will have a very significant presence. If the Office Depot headquarters building becomes vacant, "we will very aggressively find a Fortune 500 company to lease that space."

State and local governments also have a financial stake in Office Depot's headquarters. The company could be forced to repay $3.5 million in county incentives tied to creation or retention of jobs, according to Shannon LaRocque, assistant county administrator.

Office Depot stockholders, who voted for the $6.3 billion merger last May, have seen their stock take a wild ride. Share prices rose during the trial in late March and early April when U.S. District Court Judge Emmet Sullivan raised tough questions about the FTC's behavior. That fueled investor optimism about the merger, but share prices quickly deflated after the trial.

Some investors remain optimistic. On Monday, Office Depot closed at $6.26, up 12 cents or 1.95 percent; Staples closed at $10.31, up 4 cents or .39 percent

For Boca Raton, the loss of a headquarters would be significant, though Staples and Office Depot have promised to keep a "presence" in the city. The combined company would be based in Framingham, Mass., CEO Ron Sargent has said.

Office Depot's spokeswoman Karen Denning said Monday she couldn't comment on what the judge's decision might mean for employees.

While a decision by Sullivan to grant the preliminary injunction would prompt Staples to drop its bid for Office Depot, a decision not to grant the injunction would clear the way for Staples to proceed. The merger agreement ends on May 16.

Juan Morales, managing director for executive recruiter Stanton Chase in Miami, said he thinks Staples will move forward to close the merger and begin personnel changes if the preliminary injunction is denied.

"This has been hanging in the balance for so long. They're prone to act quickly. They've put a lot of people on retention bonuses. It would stand to reason those bonuses are coming to an end," Morales said.

Meanwhile, the FTC could resume its challenge of the merger in a separate administrative trial. If the FTC wins that case, it could require Staples to make certain divestitures.

During the trial, Sullivan urged the parties to work out a deal but so far those negotiations have failed.

Staples and Office Depot claim they need to combine to compete with rivals including Amazon, which the companies say is escalating office supply sales to businesses. The companies declined to mount a defense during the injunction trial, and Staples' lead lawyer was quoted as saying the FTC's case was "weak."

The FTC maintains the merger would hurt large businesses by lowering competition and raising prices. If allowed to combine, a merged Staples and Office Depot would dominate the market, the agency argued.

Under terms of the merger agreement, Staples would have to pay Office Depot a $250 million breakup fee if the preliminary injunction is granted and Staples withdraws. But analysts have said Office Depot would remain the weaker of the two competitors.

In late April, Office Depot CEO Roland Smith blamed its first-quarter's poor results on the 15-month regulatory review, saying it has had a "substantial disruptive impact on our business."

The merger was proposed on Feb. 4, 2015, and approved by Office Depot shareholders the following May. The FTC rejected the merger on Dec. 7 and initiated the court case.

mpounds@tribpub.com or 561-243-6650

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