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(Reuters) - Office supply retailer Staples Inc said the U.S. Federal Trade Commission had rejected its raised offer to divest up to $1.25 billion of commercial contracts to secure approval for its acquisition of smaller rival Office Depot Inc.
Staples, which had initially offered to divest contracts of more than $500 million, said on Monday that it was willing to continue talks with the FTC to address the antitrust regulator's concerns.
"The FTC rejected the company's offer without making a counteroffer," the No.1 U.S. office supply retailer said in a statement.
Staples shares rose more than 1 percent to $9.41 in early trading, while Office Depot shares gained about 1 percent to $5.47.
The FTC moved this month to block the deal for the second time - having prevented a combination of the top two U.S. office supply retailers in 1997 - saying a deal could lead to higher prices for small commercial customers.
Office Depot, which bought smaller rival OfficeMax in November 2013 without any divestitures, received a buyout offer from Staples again in February this year.
Canada's Competition Bureau has also said it will challenge the proposed transaction. The deal, which is also being investigated by European regulators, has been approved in China, Australia and New Zealand.
Reporting by Kirti Pandey