Despite the aims of both Staples and Office Depot, the merge did not go as planned. Also, with the ruling, merging both companies is no longer a possibility and the profits on both ends are anticipated to fall and are on the rocks.
It has been noted that the judge's decision halted the companies' plans. Shares of Office Depot and Staples plummeted Wednesday, as analysts called into question the office supply chains' ability to effectively compete in the market as stand-alone companies, reports CNBC.
Following a judge's decision that the two companies may not merge, Office Depot which was downgraded by Jefferies from "buy" to "hold," and from "neutral" to "sell" at UBS early Wednesday fell about 40 percent to below $4 a share while Staples stock, which was downgraded by both Jefferies and UBS from "buy" to "hold" status, tumbled more than 18 percent to below $9 a share, according to the same post.
Moreover, "Without the benefit of synergies, both Staples and Office Depot have less appealing profit outlooks," Jefferies analyst Daniel Binder told investors. "They will continue to face secular declines, and each company's business is vulnerable to competition from online and non-office supply retailers."
It appears that the investors flocked away from both retailers after the office supply giants scrapped their deal in the wake of a federal judge's decision to issue a temporary injunction blocking the accord and the judge ruled on objections raised by the Federal Trade Commission, notes USA Today.
Although the Staples and Office Depot merge did not come into fruition, both companies should not be undermined. However, as the values plummeted, profits are on the rocks for both entities but it remains uncertain on which sector gets the blame.
