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NEW YORK (TheStreet) -- Shares of Office Depot (ODP) - Get ODP Corporation Report are flat at $6.75 in pre-market trading on Monday following a report in the New York Post saying that regulators are leaning towards rejecting the company's $6 billion merger with rival Staples (SPLS).

Regulators are hesitant about approving the deal because it would create one office supply giant that would serve corporate and government clients, according to Post sources.

There are concerns about merging the two retailers as combined they hold all of the Fortune 1000's office-supply contracts. 

Staples has offered to transfer about $600 million in back end contracts to office supply wholesaler Essendant (ESND) in order to gain regulatory approval.

Federal Trade Commission regulators have until December 8 to decide whether to sue to halt the deal.

TheStreet Recommends

TheStreet Ratings team rates OFFICE DEPOT INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

We rate OFFICE DEPOT INC (ODP) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and poor profit margins.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio is somewhat low, currently at 0.96, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.83 is somewhat weak and could be cause for future problems.
  • After a year of stock price fluctuations, the net result is that ODP's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • ODP, with its decline in revenue, underperformed when compared the industry average of 4.5%. Since the same quarter one year prior, revenues slightly dropped by 9.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Net operating cash flow has decreased to $135.00 million or 31.47% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Specialty Retail industry. The net income has significantly decreased by 80.0% when compared to the same quarter one year ago, falling from $30.00 million to $6.00 million.
  • You can view the full analysis from the report here: ODP

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.