As 2015 is about two-thirds of the way through, the transaction between Staples and Office Depot, Inc. (NASDAQ: ODP) is about to come to a close as well. Under the terms of the agreement, Office Depot shareholders will receive $7.25 in cash and 0.2188 of a share in Staples stock at closing for each Office Depot share. The acquisition was overwhelmingly approved by Office Depot shareholders back in June but it is still at risk due to regulatory approval.
What investors need to keep in mind is that the shareholder approval is not regulatory approval, and the merger still has many hurdles to clear. The very wide merger arbitrage spread should be enough to speak for this. This comes at a time when the U.S. Department of Justice and Federal Trade Commission (FTC) have started to become more critical of certain mergers, after years and years of rarely caring.
The transaction is expected to close by the end of the calendar year 2015, which leaves about 4 months.
Analysts weighed in on Staples prior to the release of its earnings report:
- KeyBanc upgraded the company to a Buy rating.
- B. Riley reiterated a Neutral rating with a $16 price target.
- Evercore Partners upgraded Staples to a Hold rating from Sell.
- Jefferies reiterated a Buy rating with a $20 price target.
So far in 2015 Staples shares have underperformed, with shares down 20% year to date. Still, over the past 52-weeks shares are up nearly 28%.
Shares of Staples were down 0.3% at $14.19 on Tuesday afternoon. The stock has a consensus analyst price target of $18.36 and a 52-week trading range of $10.82 to $19.40.
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