Jefferies Still Buying Staples

Jefferies is still buying Staples, Inc. SPLS despite Staples warning that its agreed merger 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.

"We have maintained our Buy rating because unlike the FTC, we believe price constraints exist in the market and believe there is some chance the court will see that too," analyst Daniel Binder said in a note to clients.

Binder, who cut his price target to $17 from $20, noted that growth in fiscal 2017 reflects growth in mid-market and beyond office supply (BOS) categories. Management's FY17 growth plan includes accelerating contract BOS revenues through the addition of 100 sales specialists; deeper mid-market penetration though a 20 percent increase in sales force and loyalty program; and improving store and online traffic.

Based on management's tone and comments about the FTC's view on this proposed acquisition, Binder feel that there are no new remedy discussions. While there is still some time left to settle, it feels like this will go to court later this month.

Staples shares were up 1 percent at $9.67.