Staples Sells Stores To Clear Way For Merger With Office Depot

In a deal likely to win over government monopoly regulators, office supply retailers Staples and Office Depot agreed Wednesday to sell 63 stores to their biggest competitor.

The $108.75 million cash deal expands OfficeMax Inc. into new cities and is intended to build the chain into a bigger rival of the combined Staples and Office Depot.

Two days before the deal was reached, the Federal Trade Commission said it would oppose Staples’ purchase of Office Depot. The FTC said it was concerned the new company would control the market for office supplies in many cities and eventually raise prices.

By selling the stores to OfficeMax, Staples and Office Depot appeared to satisfy FTC concerns that the merger would have left some cities with a single “superstore” chain.

“I would be very surprised if this deal doesn’t go through,” said Jim Stoeffel, an analyst with Smith Barney. “It certainly alleviates the FTC’s problem because you still have two competitors in these markets.”

Cleveland-based OfficeMax, meanwhile, gains an instant presence in markets where it hadn’t been operating. It also bought the stores at a good price because of the FTC pressure on Staples, analysts said.

The sale was announced a day before the FTC would have gone to court to block the $4 billion Staples-Office Depot merger, a move Staples had pledged to fight.

Immediately after the announcement, the companies agreed to hold off on closing the merger until at least Monday to give regulators time to review the deal again.

The FTC wouldn’t comment on whether the OfficeMax sale made approval of the merger more likely.

“If they present us with something serious to talk about then we’ll talk,” FTC spokeswoman Victoria Streitfeld said.

But Staples appeared confident that federal regulators would lift their opposition to the merger.

Todd Krasnow, Staples’ executive vice president for marketing, said the deal “clears the way” for the Office Depot merger.

Key markets where OfficeMax is acquiring stores include Baltimore, Washington, San Diego, Tampa-St. Petersburg, Fla., Louisville, Ky., and Los Angeles.