Staples Inc., parent company of Top 40 distributor Staples Promotional Products (asi/120601), has reached an agreement with the Federal Trade Commission (FTC) to extend the deadline for the office company’s acquisition of Office Depot. The FTC’s review, originally scheduled to conclude this week, now must be completed by December 8.
“We’re pleased to reach an agreement with the FTC to extend the review period for the Office Depot transaction,” said Ron Sargent, chairman and CEO of Staples Inc. “This transaction will enable us to better serve our customers and to compete in an evolving marketplace. We will continue to work cooperatively with the Federal Trade Commission.”
The FTC initiated a review over concerns that Staples’ acquisition of Office Depot, which would combine the two biggest office store retailers in the U.S., would prove anti-competitive. The transaction has been approved in Australia, New Zealand and China, while the U.S., Canada and Europe are still reviewing the acquisition. Last month, the European Union launched a probe over concerns that the deal, according to Europe’s antitrust commission, “could eliminate an important competitor and reduce the choice of suitable suppliers in already concentrated markets, which could lead to price increases.”
Analysts speculate that the extension from the FTC could be a positive sign for Staples. "We wonder if the FTC would bother agreeing to an extension if it was dead set on blocking the deal," BB&T Capital Markets analyst Anthony Chukumba wrote in a note. Staples and Office Depot will likely use the extension to negotiate possible compromises to ensure the deal is approved, such as divesting their large delivery accounts.
In its most recent Q2 earnings release, Staples announced a 5% decrease in overall sales but a 1% increase after excluding store closures and foreign exchange rate changes. Staples Promotional Products, the largest North American distributor in the industry, increased its revenue by more than 10% in the quarter.