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FTC approves office-supply chain merger

| Nov 13, 2013 | Business Formation & Planning |

North Carolina business owners might be interested in a proposed merger deal between two major office-supply companies that recently received federal regulatory approval. The merger of Office Depot Inc. and OfficeMax Inc. will create a rival that is nearly the size of industry leader Staples Inc.

The merger deal comes after a seven-month investigation by the U.S. Federal Trade Commission before the agency gave its approval on Nov. 1. In 1997, the FTC had failed to approve a proposed merger between Staples and Office Depot on the grounds that it would violate anticompetitive laws. The FTC said that the market had changed since then, and cited competition in the office supply business from WalMart Inc. and online retailers.

The transaction would combine the second and third largest office-supply chains. Company officials said the cost savings from the $1.17 billion merger will amount to around $600 million. That figure does not include savings from closing an estimated 500 of the combined total of more than 2,100 stores. The merger will result in the new entity having combined sales revenue of $18 billion with more clout to negotiate with suppliers so it can lower its prices on products. That will help it compete with Staples, which currently has more than $24 billion in annual sales.

The office-supply business has become more competitive as customers go digital and purchase fewer supplies such as paper and pens. When companies structure a merger properly it can help them to achieve their goals, as this merger does with cutting costs and helping them to compete with Staples. An attorney with business law experience may be able to help both clients who are interested in establishing a business as well as those who are interested in expanding operations.

Source: Bloomberg, “Office Depot Merger With OfficeMax Wins U.S. Approval“, David McLaughlin & Matt Townsend, November 01, 2013

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