FTC review date for Staples-Office Depot deal extended

By Yashaswini Swamynathan

(Reuters) - Office supplies retailer Staples Inc (NASDAQ: SPLS) has agreed with the Federal Trade Commission to extend the review period for its $6.3 billion takeover of Office Depot Inc (NASDAQ: ODP).

The regulator will decide on the deal by Dec. 8, the companies said on Monday.

The extension follows EU regulators launching an investigation into the deal last month, warning that it could lead to price hikes.

Some analysts said they believed the extension was a positive sign.

"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 first tried to buy Office Depot in 1996, but U.S. regulators blocked the transaction in 1997.

The extension gives the companies more time to negotiate "deal remedies," including the potential divestiture of large delivery accounts, said Chukumba, who is rated five out of five by Thomson Reuters for his coverage of the companies.

Given that "these accounts are by far the least profitable for the office supply retailers," the deal will be highly accretive to Staples' earnings even after significant divestitures, he said.

Telsey Advisory Group analyst Joseph Feldman said he saw a 60-65 percent chance of the FTC approving the deal, "a little below" his estimate six months ago.

If the FTC asks the companies to give up some customers in the units that sell to other businesses, "it could be a deal-breaker for both Staples and Office Depot," he said.

The companies said on Aug. 28 that they had submitted additional information to the FTC and agreed to not close the transaction for at least 45 days.

Jefferies analyst Daniel Binder said his checks suggested privately held office supplies retailer WB Mason had not been approached in connection with the deal.

Amazon.com Inc (NASDAQ: AMZN), W W Grainger Inc (NYSE: GWW) and United Stationers Inc - which has been renamed Essendant Inc (NASDAQ: ESND) - could be possible buyers of the companies' divested businesses, although Staples "would cringe at the thought of escorting Amazon into the business," he wrote in a note.

The deal has been approved by regulators in China, Australia and New Zealand.

Staples shares were down 1 percent at $12.25 in afternoon trading on Monday, while Office Depot shares were down 1.6 percent at $6.57.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Saumyadeb Chakrabarty and Kirti Pandey)

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