Staples buys Office Depot to fight internet competition

Staples store with family out front Image copyright Reuters
Image caption Staples tried to buy Office Depot in 1997, but the move was rejected by US regulators

US office supply store Staples has announced it will buy rival Office Depot for $6.3bn (£4bn) in an effort to fend off competition from internet retailers such as Amazon.

However, the deal will come under the scrutiny of regulators.

Nearly 18 years ago, the US Federal Trade Commission (FTC) rejected a merger between the two firms, citing antitrust concerns.

But the market for office supplies has changed significantly since then.

Just over a year ago, the FTC approved Office Depot's merger with Office Max - the other main US office supply chain - citing increased competition.

Sales at all three chains had been declining for some time, as customers used internet retailers such as Amazon, as well as other large supply stores like Walmart and Target, for their office supplies.

Last year, Staples announced it would close 12% of its 1,300 stores in the US.

"This is a transformational acquisition which enables Staples to provide more value to customers, and more effectively compete in a rapidly evolving competitive environment," said Ron Sargent, Staples' chairman and chief executive officer, in a statement.

"We expect to recognise at least $1bn of synergies as we aggressively reduce global expenses and optimise our retail footprint," he added.

Shares in Staples fell more than 10% on news of the purchase, as investors weighed whether or not the move would be approved by regulators.

Staples said it had agreed to pay Office Depot a $250m fee if the merger is scuttled.

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