Staples Warns Office Depot Deal Could Fall Through If This Happens

Staples, Inc. SPLS has warned that the merger deal with Office Depot Inc ODP would fall apart if a judge grants a preliminary injunction on behalf of the U.S. Federal Trade Commission, which is seeking to block the deal.

The merger has been approved, with concessions, in all jurisdictions except for the United States and Canada. In December, the FTC sued to block the deal, saying that the proposed $6.3 billion merger would stifle competition and raise prices for customers.

The FTC's complaint states that post-merger, Staples would control more than 70 percent of the office supplies market. The next-largest competitor would possess less than 5 percent. The injunction hearing is due to begin this month, with U.S. District Judge Emmet Sullivan ruling on the case by May 10.

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If Sullivan sides with the FTC, "the acquisition of Office Depot is over from our perspective," Staples said on a conference call with analysts.

Staples is already preparing a contingency plan if the merger doesn't go through. If it happens, it will be the second time the FTC thwarted a Staples acquisition of Office Depot.

"We've been working on Plan B for several months at this point," Staples said in the call.

Earlier, Staples announced its quarterly results, with both earnings and sales missing Street view. Staples posted a quarterly profit of $86 million, or 13 cents a share, versus a year-ago loss of $260 million, or 41 cents a share. Its adjusted earnings came in at 26 cents a share. Sales dropped 6.9 percent to $5.23 billion. Analysts, on average, were projecting earnings of 28 cents per share, on sales of $5.4 billion.

Shares of Staples were down 1 percent at $9.80, while Office Depot gained 2 percent at $5.26.