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Judge blocks Staples deal
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June 30, 1997: 6:28 p.m. ET
Ruling leaves $4 billion merger with Office Depot unlikely, say companies
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NEW YORK (CNNfn) - A federal judge on Monday granted a preliminary injunction against the proposed $4 billion merger between Staples Inc. and Office Depot Inc., a move the two companies say will make any merger unlikely.
The ruling by U.S. District Court Judge Thomas Hogan in Washington, D.C. was a major victory for the U.S. Federal Trade Commission, which had fought bitterly to block the combination of the two office supply giants.
The FTC argued the new company would violate antitrust laws and have the power to raise consumer prices.
"Consumers have won today," said William Baer, competition director for the FTC. "And competition has been preserved."
Don Kemps, attorney for Staples, said he was "stunned" by the decision. He said Staples would decide within four days whether to appeal.
But later in the day, Staples issued a statement saying that it was "likely to terminate its agreement to merge with Office Depot" following the ruling.
Thomas G. Stemberg, chairman and chief executive officer of Staples, said: "We are disappointed with Judge Hogan's ruling, especially given the strength of our case and supporting evidence that demonstrate the enormous cost savings that would have resulted from our proposed merger ... This is a sad day for small businesses and consumers."
Earlier David Fuente, CEO of Office Depot, had hinted the court's findings may have quashed the merger for good.
"Office Depot has been engaged in a long and frustrating attempt to merge with Staples," Fuente said. "We still believe that the decision to merge our two companies was sound … but today's decision by Judge Hogan means the merger is now unlikely."
Last month, Stemberg said he would give up the legal battle if Hogan granted the FTC's request for a preliminary injunction.
The court fight has cost the two companies more than $12 million.
Staples first announced plans to buy its rival in September 1996. The companies said the deal would create a chain with more than 1,100 stores in the United States and Canada and annual sales of $10.7 billion.
But the $4 billion stock deal raised immediate alarms with the FTC as one competitor -- OfficeMax, with sales of $3.3 billion -- would remain after the proposed merger.
Staples, however, had argued the new company would only have about 5 percent of the office supply market.
News of ruling came after the close of trading Monday. Staples ended the day off 3/8 at 23-1/8 while Office Depot closed up1/8 at 19-7/16. 
--Martine Costello
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