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Staples' Office Depot Buyout Cleared by Australian Regulators

Zacks Equity Research
Updated

After New Zealand and China, Staples Inc SPLS has received clearance from Australian regulators for the $6.3 billion acquisition of Office Depot, Inc. ODP. While Australian Competition and Consumer Commission has approved the acquisition, the company continues to work in tandem with U.S Federal authorities as well as regulators in Europe and Canada to conclude the transaction by the end of 2015.

The transaction has already received approval from a thumping majority of Office Depot shareholders at the company’s Annual Meeting of Shareholders held on Jun 19.

Earlier, in February, Staples had announced that it will acquire rival Office Depot in a multi-billion dollar deal. Together, the two companies would create a retail chain with approximately $39 billion in revenue and thousands of stores. This idea is not a new one as the same was proposed 18 years ago but dismissed by the Federal Trade Commission at the time, after being slammed as anticompetitive.

However, a changing consumer landscape is pushing it forward this time, as office supply retailers are facing increasing competition from companies like Wal-Mart Stores Inc. WMT and Amazon.com Inc. AMZN.

We believe that the deal between Staples and Office Depot will stave off competition, help in attaining cost synergies and provide consumers with a better omni-channel platform. The transaction is expected to generate annualized cost synergies of $1 billion by fiscal third year, after the deal is closed. The company expects to incur nearly $1 billion in one-time expenses to realize the above-mentioned synergies.

At present, both Staples and Office Depot carry a Zacks Rank# 3 (Hold).

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WAL-MART STORES (WMT): Free Stock Analysis Report
 
OFFICE DEPOT (ODP): Free Stock Analysis Report
 
STAPLES INC (SPLS): Free Stock Analysis Report
 
AMAZON.COM INC (AMZN): Free Stock Analysis Report
 
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Zacks Investment Research