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SUPPLEMENT
DATED MAY 29, 1997
TO
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STAPLES, INC.
and
OFFICE DEPOT, INC.
JOINT PROXY STATEMENT
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STAPLES, INC. PROSPECTUS
Introduction
This Supplement is provided for the purpose of supplementing the Joint
Proxy Statement/Prospectus dated January 23, 1997 of Staples, Inc., a Delaware
corporation ("Staples"), and Office Depot, Inc., a Delaware corporation ("Office
Depot").
This Supplement is being furnished to holders of Common Stock, par
value $.0006 per share, of Staples ("Staples Common Stock") in connection with
the solicitation of proxies by the Board of Directors of Staples for use at a
Special Meeting of Stockholders of Staples which was originally convened on
February 27, 1997 and has been subsequently adjourned to Wednesday, June 18,
1997, at the offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts, commencing at 9:00 a.m., local time, and any further adjournment
or postponement thereof (as so adjourned, the "Staples Special Meeting"). This
Supplement is also being furnished to holders of Common Stock, par value $.01
per share, of Office Depot ("Office Depot Common Stock") in connection with (i)
the solicitation of proxies by the Board of Directors of Office Depot for use at
the Special Meeting of Stockholders of Office Depot which was originally
convened on February 27, 1997 and has been subsequently adjourned to Wednesday,
June 18, 1997 at the corporate offices of Office Depot, 2100 Old Germantown
Road, Delray Beach, Florida, commencing at 9:00 a.m., local time, and at any
further adjournment or postponement thereof (as so adjourned, the "Office Depot
Special Meeting") and (ii) the offer by Staples of up to 190,000,000 shares of
Staples Common Stock (and accompanying Staples preferred stock purchase rights)
(the "Shares") which may be issued pursuant to the Agreement and Plan of Merger,
dated as of September 4, 1996, among Staples, Marlin Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of Staples ("Sub"), and
Office Depot (as amended, the "Merger Agreement") in exchange for outstanding
shares of Office Depot Common Stock.
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As more fully described in the Joint Proxy Statement/Prospectus,
pursuant to the Merger Agreement, and assuming that the issuance of the Shares
and the Merger Agreement are approved by the stockholders of Staples and Office
Depot, respectively, and the other conditions to the consummation of the Merger
are satisfied or waived, Sub will be merged with and into Office Depot (the
"Merger"), which will be the surviving corporation in the Merger and become a
wholly-owned subsidiary of Staples, and each outstanding share of Office Depot
Common Stock will be converted into the right to receive 1.14 shares of Staples
Common Stock (together with an appropriate number of preferred stock purchase
rights attached thereto). On May 28, 1997, the last reported sale price of the
Staples Common Stock on the Nasdaq National Market was $21.50 per share, and the
last reported sale price of the Office Depot Common Stock on the New York Stock
Exchange was $17.00 per share
This Supplement and the accompanying forms of proxy are first being
mailed to stockholders of Staples and of Office Depot on or about June 3, 1997.
This Supplement should be read in conjunction with the Joint Proxy
Statement/Prospectus dated January 23, 1997 of Staples and Office Depot.
Amendment to Merger Agreement
On May 27, 1997, Staples and Office Depot executed Amendment No. 2 to
the Merger Agreement (the "Second Amendment"), which modified the Merger
Agreement in two respects. First, Section 8.01(b) of the Merger Agreement was
amended to provide that either Staples or Office Depot may terminate the Merger
Agreement if the Merger has not been consummated by June 30, 1997 (provided that
the right to so terminate the Merger Agreement will not be available to any
party whose failure to fulfill any obligation under the Merger Agreement has
caused the failure of the Merger to occur on or before such date); prior to such
amendment, such termination right would have arisen if the Merger had not been
consummated by May 31, 1997. Second, the Second Amendment established an
additional termination right, which provides that (i) either Staples or Office
Depot may terminate the Merger Agreement at any time during the period
commencing upon the issuance of a ruling on the Preliminary Injunction Motion
(as defined below) and ending at 11:59 p.m. (Boston time) on the fourth business
day following the day on which a written ruling on the Preliminary Injunction
Motion is first published, and (ii) neither Staples nor Office Depot shall be
obligated to consummate the Merger prior to the expiration of the termination
right set forth in the preceding clause (i). This four business day period will
provide each of Staples and Office Depot with the opportunity to review the
basis for any denial by the Court (as defined below) of the Preliminary
Injunction Motion and to determine whether it would be in the best interests of
their respective stockholders to consummate the Merger notwithstanding an appeal
by the Federal Trade Commission (the "FTC") of the Court's decision with respect
to the Preliminary Injunction Motion or the institution or possible institution
by the FTC of an administrative proceeding challenging the Merger. See
"Antitrust Matters." A copy
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of the Second Amendment has been filed as an exhibit to the respective Current
Reports on Form 8-K of each of Staples and Office Depot dated May 27, 1997,
which are incorporated by reference into the Joint Proxy Statement/Prospectus,
and the foregoing summary is qualified in its entirety by reference to such copy
of the Second Amendment.
Antitrust Matters
On March 10, 1997, the FTC announced that it intended to seek a
federal district court order to prevent the Merger on the grounds that the
Merger would violate federal antitrust laws by substantially reducing
competition in the retail sale of office supplies by office supply superstores
in various local markets throughout the country where Staples and Office Depot
directly compete against each other. In an attempt to address the FTC's
challenge to the Merger, on March 26, 1997 Staples and Office Depot entered into
an Asset Purchase Agreement (the "OfficeMax Agreement") with OfficeMax, Inc., an
Ohio corporation ("OfficeMax"), pursuant to which Staples and Office Depot
agreed to sell to OfficeMax a total of 63 stores currently owned by Staples or
Office Depot (the "Disposed Stores") for a total purchase price of $108.75
million (subject to certain adjustments). The consummation of the sale of stores
to OfficeMax under the OfficeMax Agreement was conditioned upon, among other
things, the issuance by the FTC of a final order permitting the consummation of
the Merger subject to an asset divestiture requirement that would be satisfied
by Staples and Office Depot through the sale of the Disposed Stores to OfficeMax
pursuant to the OfficeMax Agreement.
On April 4, 1997, the FTC announced that it had rejected Staples' and
Office Depot's proposed resolution of its competitive concerns through the
OfficeMax Agreement. On April 10, 1997, the FTC filed a motion in the United
States District Court for the District of Columbia (the "Court") seeking both a
temporary restraining order and a preliminary injunction prohibiting
consummation of the Merger. Staples and Office Depot represented to the Court
that they would not consummate the Merger until the Court has ruled on the FTC's
motion for a preliminary injunction (the "Preliminary Injunction Motion") or
until Staples and Office Depot have given seven days advance notice to both the
Court and the FTC, and the Court denied the FTC's motion for a temporary
restraining order as moot.
The Court held a five-day hearing, from May 19, 1997 through May 23,
1997, with respect to the Preliminary Injunction Motion. The Court has indicated
that it expects to issue a ruling on that motion in mid-June.
Staples and Office Depot believe that there are a number of possible
outcomes of the hearing on the Preliminary Injunction Motion. These outcomes are
summarized below.
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1. Grant of a Preliminary Injunction. If the Court were to grant the
Preliminary Injunction Motion, the FTC would have 20 days in which to institute
an administrative proceeding challenging the Merger. If, as expected in such a
circumstance, the FTC were to institute such a proceeding, the preliminary
injunction would remain in effect pending the conclusion of such proceeding and
would prohibit Staples and Office Depot from consummating the Merger unless and
until Staples and Office Depot were to prevail in such proceeding. Unless
Staples and Office Depot reach a settlement with the FTC, Staples and Office
Depot expect that they will terminate the Merger Agreement if the Court grants
the preliminary injunction requested by the FTC.
2. Denial of Preliminary Injunction. If the Court denies the
Preliminary Injunction Motion, several outcomes are possible:
o Appeal of the Denial of Preliminary Injunction. The FTC may
elect to appeal the denial and, were it to choose to do so, would
likely seek an emergency stay pending the resolution of the appeal by
the appellate court. If the FTC did appeal and did obtain an emergency
stay, Staples and Office Depot would not be permitted to consummate the
Merger until the appeal was resolved. If the appeal were ultimately
resolved by an order affirming the denial of the preliminary
injunction, the FTC could nonetheless elect to institute an
administrative proceeding, as discussed below. If the appeal were
resolved by an order reversing the Court and entering a preliminary
injunction order, the effect would be the same as described above under
"Grant of a Preliminary Injunction."
o Administrative Litigation by FTC. The FTC may elect to
institute an administrative proceeding challenging the Merger within 20
days following the denial of the Preliminary Injunction Motion. Either
before or after any institution of such proceeding, Staples and Office
Depot could consummate the Merger because there would be no
governmental or court order prohibiting consummation. If the
Preliminary Injunction Motion is denied, Staples and Office Depot
expect that they will consummate the Merger as promptly as practicable
(assuming the satisfaction or waiver of the other conditions to the
closing of the Merger). However, in accordance with the Second
Amendment, each of Staples and Office Depot has the right to terminate
the Merger Agreement within the four business days following the day on
which a written ruling on the Preliminary Injunction Motion is first
published. Accordingly, within such four business day period, each of
Staples and Office Depot will have the opportunity to review the basis
for the Court's ruling and to determine whether it would be in the best
interests of their respective stockholders to consummate the Merger
notwithstanding an appeal by the FTC of the Court's decision with
respect to the Preliminary Injunction Motion or the institution or
possible institution by the FTC of an administrative proceeding
challenging the Merger.
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A decision by Staples and Office Depot to consummate the
Merger notwithstanding such an administrative proceeding or possible
administrative proceeding would subject Staples/Office Depot (as the
combined company following the Merger) to the risk that, if the FTC
were to ultimately prevail in such an administrative proceeding or, if
the parties were to agree upon a settlement, the relief which might be
imposed or the settlement could include the divestiture of significant
assets, including a significant number of stores and/or other
properties acquired through the Merger. Any administrative proceeding
would extend over a protracted period of time and could require
Staples/Office Depot to incur significant additional litigation
expenses. Any required divestiture or spin-off could have a material
adverse effect on the combined operations of Staples/Office Depot.
o No further litigation by FTC. The denial of the Preliminary
Injunction Motion, with or without an appeal, might persuade the FTC
not to litigate further.
State Inquiries
The Attorneys General for seven states have served subpoenas or civil
investigative demands for certain information and documents in connection with
their independent review of the Merger. In response, Staples and Office Depot
have provided and have agreed to continue to provide certain responsive
materials to such Attorneys General.
Undated Pro Forma Combined Financial Information
The following selected pro forma combined financial information is
derived from the pro forma combined condensed financial statements of Staples
and Office Depot, included in the Current Report on Form 8-K of Staples dated
May 27, 1997 and incorporated by reference into the Joint Proxy
Statement/Prospectus, which give effect to the Merger as a pooling of interests,
and should be read in conjunction with such pro forma statements and the notes
thereto. For the purpose of the pro forma combined statement of income data,
Staples' results of operations for the fiscal year ended February 1, 1997 have
been combined with Office Depot's results of operations for the fiscal year
ended December 28, 1996. For the purpose of the pro forma combined balance
sheet, Staples' consolidated balance sheet as of February 1, 1997 has been
combined with Office Depot's consolidated balance sheet as of December 28, 1996,
giving effect to the Merger as if it had occurred on February 1, 1997.
The pro forma combined information is presented for illustrative
purposes only and is not necessarily indicative of the operating results or
financial position that would have been achieved if the Merger had been
consummated as of the beginning of the periods presented, nor is it necessarily
indicative of the future operating results
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or financial position of Staples/Office Depot. The pro forma combined financial
information does not give effect to any cost savings which may result from the
integration of Staples' and Office Depot's operations. Additionally, the pro
forma combined statements of income do not include the merger-related,
consolidation and integration expenses associated with the Merger. No material
adjustments were required to conform the accounting policies of the two
companies.
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(In thousands, except per share data)
Fiscal Year Ended
February 1, 1997
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Unaudited Pro Forma Combined Statement of Income
Sales $10,036,263
Net income 235,806
Net income per common shares -
primary .68
Net income per common share - fully
diluted .67
Shares used to compute net income
per common share - primary 347,491
Shares used to compute net income
per common share - fully diluted 366,449
February 1, 1997
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Unaudited Pro Forma Combined Balance sheet:
Data (1):
Working capital $ 837,588
Total assets 4,425,582
Long-term obligations, less current portion 808,099
Stockholders' equity 1,535,144
(1) The pro forma combined balance sheet as of February 1, 1997 includes an
accrual of $575 million for the estimated merger-related, consolidation
and integration expenses and the deferred tax benefit of $197 million
relating to these expenses.
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Voting Procedures
Enclosed for your convenience is a duplicate proxy card. If you have
not already voted or would like to change your vote, please complete, sign, date
and promptly return the enclosed proxy card in the enclosed envelope. If Staples
or Office Depot receives the enclosed proxy card, duly executed and dated, prior
to the relevant Special Meeting, any proxy previously granted by such
stockholder will be,
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without further action, revoked. Any proxy previously granted to Staples or
Office Depot, as applicable, may also be revoked by delivering written notice of
revocation to the Secretary of Staples or Office Depot, as applicable, prior to
the time voting is declared closed or by attending the relevant Special Meeting
and voting in person.
IF YOU HAVE ALREADY RETURNED A PROXY CARD AND DO NOT WISH TO CHANGE
YOUR VOTE, NO FURTHER ACTION IS REQUIRED.
If you have questions or require an additional copy of the Joint Proxy
Statement/Prospectus, please contact Corporate Investor Communications, Inc. at
201-896-1900.
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