After FTC Blocks Acquisition of Office Depot, Staples Eyes Strategic Focus on Customer Experience

After the Federal Trade Commission officially blocked Staples’ acquisition of Office Depot this month, Staples officials have turned their eyes to the future to focus on brand loyalty and customer experience.

Staples CEO addressed the failed Office Depot acquisition during the company’s first-quarter earnings call on May 18.

“I think everybody on the call knows that last week the U.S. District Court, District of Columbia granted the FTC’s request to block our acquisition of Office Depot,” Sargent said, according to Seeking Alpha. “We were disappointed that the FTC’s request was granted despite the fact that in our view it failed to define the relevant market correctly and fell short of proving its case. The FTC excluded ink and toner from the market definition of consumable office supplies. They only focused on Fortune 100 customers and acknowledged that there were no concerns about any harm to consumers or small or medium businesses. The FTC ignored the competitive threat from Amazon business and a host of other competitors and also encouraged witnesses to say things that weren’t true to bolster their case.”

Sargent continued: “We are also disappointed that our proposed remedies to satisfy the FTC’s concerns were unsuccessful and that our commitment to invest a significant portion of the synergies at lower prices for all customers was not heard. We pursued the Office Depot acquisition to provide increased value to customers, to compete more effectively against the large and diverse set of competitors and to generate tremendous value for our shareholders. Over the past 20 months, we have committed a lot of time and resources to getting the deal done. Given the additional time and resources we’d have to commit to pursue an appeal, we have determined that it’s in the best interest of our shareholders to forego appealing the court’s ruling.”

Staples terminated the merger agreement with Office Depot and paid the $250 million breakup fee.

“We are now focused on moving forward and we are focused on executing our strategic plan to drive shareholder value for what we are referring to internally as Staple’s 2020,” Sargent explained. “This plan builds on our reinvention successes over the past few years and it is supported by our strongest competitive advantages.”

The strategic plan includes four key priorities.

“First, we are focusing on winning with mid-market customers in North America by accelerating growth in services and products beyond office supplies,” Sargent said. “Second, we are reshaping Staples by narrowing our focus on North America right sizing our retail network and exploring strategic alternatives for our European operations. Third, we are taking aggressive action to reduce cost and drive efficiency further across the organization and fourth, we are continuing to return cash to shareholders through dividends and share repurchases.  We streamlined our organization to build a simplified structure, speed up decision-making, and provide flexibility to invest in our critical, strategic objectives. The changes we have made have set us up for success. We have expertise in a wide range of products and services. We have a world-class supply chain and next day delivery capability. Our digital expertise provides a differentiated customer experience.”

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