According to the New York Post, the much-awaited merger between Staples, Inc. SPLS and Office Depot, Inc. ODP may not get a green signal from the Federal Trade Commission (FTC). Following the news, shares of Staples and Office Depot declined 2% and 2.4%, respectively, yesterday.
Quoting two sources familiar with the matter, the New York Post reported that FTC is “wary of a tie-up that will result in a single nationwide office supply giant to serve big corporate and government clients.” There is also a possibility of FTC further deferring the deal and demanding more concessions from Staples. Per the New York Post, two of the four FTC commissioners reviewing the deal are against it.
The FTC was supposed to announce its decision on the pending merger in October. However, after the European Union (EU) regulators opened a thorough investigation into the antitrust impact of the merger, the FTC is being more cautious and has delayed its decision till Dec 8, 2015. The EU regulators are apprehensive about the deal since it could reduce the much-needed competition, which in turn, will lead to price increases and less choice for customers.
In Feb 2015, Staples had announced that it will acquire Office Depot in a multi-billion dollar deal. Subsequently, in September, both Staples and Office Depot furnished additional documents and information to the FTC that complied with the commission’s “second request." Both the companies agreed to “substantial compliance” and provided information regarding Staples’ $6.3 billion proposed buyout of Office Depot. The companies continue to work in tandem with the Fed regulators.
We note that the companies have been interested in the deal for a very long time as the merger was proposed 18 years ago as well. However, the deal was rejected by the FTC at that time, after being slammed as anticompetitive.
Zacks Rank
Currently, both Staples and Office Depot carry a Zacks Rank #3 (Hold). Some better-ranked stocks in the retail sector include ULTA Salon, Cosmetics & Fragrance, Inc. ULTA and CST Brands, Inc. CST. Both the companies hold a Zacks Rank #2 (Buy).
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