The U.S. Federal Trade Commission has approved of Staples’ proposed acquisition of B2B office supply wholesaler Essendant, reports in the Wall Street Journal said this week.
The $483 million takeover will see Essendant merging its wholesale operations into Staples, now owned by Sycamore Partners. Essendant sells office supplies to other retailers, including Staples, meaning the companies are not in direct competition with each other.
The deal still led to competition concerns, culminating in the bipartisan split in the FTC over the merger. The FTC is headed by Republican Chairman Joseph Simons, who said the review of the merger examined whether Staples could raise office supply prices for some of its competitors that procure goods from Essendant, including Office Depot.
Ultimately the FTC’s decision found that such a strategy “would not be profitable for Staples.”
Democratic Commissioner Rebecca Slaugher wrote a dissenting opinion, drawing concerns over “fewer and more dominant companies” and warning that “vertical mergers that integrate trading partners can be just as pernicious” as mergers between direct rivals.
Staples has moved to adjust its strategy in recent years through a CEO switch-up and new initiatives to keep up with a changing eCommerce landscape. That strategy includes ramping up its focus on B2B sales, including small businesses.
Office Depot simultaneously endured its own change of leadership and store closures in recent years. In 2015 there was talk of a possible merger between Staples and Office Depot, with Starboard Value CEO Jeffrey C. Smith sending a letter to Staples demanding that the company explore a possible deal.
The office supply industry’s struggles to evolve and compete with eRetail giants has been one factor behind companies like Staples enhancing their business-to-business focus, but as the B2B commerce space continues its own shift online, and as B2C eRetailers like Amazon enhance their own B2B services, the industry will likely continue to face headwinds from technological disruptions.