Investing.com -- Shares in Office Depot Inc (NASDAQ:ODP) plunged more than 25% as one of the largest office supply companies in the world scrapped a planned $6.3 billion merger with Staples Inc (NASDAQ:SPLS) on Tuesday evening after a U.S. federal judge approved the Federal Trade Commission's request for a temporary injunction, effectively thwarting the deal.
Citing a wide range of antitrust concerns, U.S. federal judge Emmet Sullivan of the U.S. District Court for the District of Columbia issued a three-page order granting an injunction to the FTC. Shortly after, Office Depot said the companies would not appeal the ruling and will discontinue the merger on May 16.
"While we are respectful of the Court's decision to grant the FTC's request for a preliminary injunction to prevent our merger with Staples, we are disappointed by this outcome and strongly believe that a merger would have benefitted all of our customers in the long term," Office Depot CEO Roland Smith said in a statement.
In early-December, the FTC filed an administrative complaint challenging the massive merger claiming that it would significantly reduce nationwide competition in the consumable office supplies market sold to large business customers. The complaint alleged that the two companies are both each other's largest competitors in the market.
"The Commission has reason to believe that the proposed merger between Staples and Office Depot is likely to eliminate beneficial competition that large companies rely on to reduce the costs of office supplies,” FTC Chairwoman Edith Ramirez said at the time. “The FTC’s complaint alleges that Staples and Office Depot are often the top two bidders for large business customers."
Staples said in a statement that it will pay Office Depot a $250 million termination fee as a result of the broken deal.
Shares in Office Depot fell more than 25% in after-hours, while shares in Staples dropped by 10% before trading in both companies was halted on Tuesday evening.