Staples agrees to sell 63 stores to OfficeMax 4 in Baltimore involved in antitrust deal

March 13, 1997|By BLOOMBERG NEWS

WASHINGTON -- Staples Inc. reached a tentative agreement yesterday to sell 63 stores to rival OfficeMax Inc. for about $109 million, in a move aimed at heading off a Federal Trade Commission antitrust lawsuit over Staples' proposed purchase of Office Depot Inc.

The Federal Trade Commission was expected to go to court today to seek a preliminary injunction to block the Office Depot acquisition, valued at about $4.6 billion in stock and assumed debt. The divestitures, with a price tag that's about half of what Staples wanted for the stores, is similar to the agreement Staples said it hammered out with the FTC several weeks ago.

"It shows how badly Staples wants to do this deal," said Robert Chapman, who heads the Los Angeles-based investment firm Chapman Capital and holds shares of Office Depot. "One could make an argument these stores are worth at least twice what Office-Max is paying."

The FTC's concerns -- that prices would rise in the 18 states plus the District of Columbia where Staples and Office Depot compete head to head -- would be settled if OfficeMax bought stores in those regions and maintained competition among office-supply superstores, Staples officials said.

Under yesterday's agreement, OfficeMax would buy four stores in Baltimore; 14 stores in Washington, D.C; two stores in Louisville, Ky; 14 in Los Angeles; nine in San Diego; nine Staples sites in Tampa/St. Petersburg, Fla; and 11 stores in other markets throughout the United States.

The sale requires FTC approval and won't occur unless the merger is completed.

The agreement negotiated with OfficeMax isn't a guaranteed resolution of FTC concerns that consumer prices would rise in markets where Staples and Office Depot compete, said William Baer, director of the FTC's Bureau of Competition. Still, he said, the agency is open to reviewing proposals.

"If people want to come in and make a proposal and give us some time to give it consideration, we'll do it," said Baer. He declined to comment on the agreement with OfficeMax.

Staples is giving the agency extra time to do that. The company said it will extend the antitrust review period until Monday, which means the FTC doesn't have to file its suit in a federal district court by today, when the previous review period expires.

If the FTC decides that the sales do settle its concerns, Staples will become the clear leader in the $185 billion office-supply market. The new company, to be known as Staples Office Depot, will have almost $10 billion in sales and more than 1,000 stores.

OfficeMax, Staples and Office Depot currently run neck and neck in store counts. Staples has 577 stores, OfficeMax 574 and Office Depot 572. Office Depot is the revenue leader, followed by Staples and OfficeMax.

Shares of Office Depot have been rising and falling this week on speculation that Staples and OfficeMax would reach an agreement, analysts said.

Yesterday, Office Depot shares closed up $3.25 to $22 on trading of 9 million shares, more than six times its three-month daily average. Staples shares fell $1.25 to $22, and OfficeMax rose $1.75 to $15.

Pub Date: 3/13/97

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