Massachusetts-based Staples Inc., the parent company of Top 40 distributor Staples Promotional Products (asi/120601), has agreed to buy rival Office Depot for $6.3 billion. The deal, which still must be approved by the Federal Trade Commission (FTC), would join together the two largest office supply retailers in the U.S.

“This is a transformational acquisition which enables Staples to provide more value to customers, and more effectively compete in a rapidly evolving competitive environment,” said Ron Sargent, Staples’ chairman and CEO. “We expect to recognize at least $1 billion of synergies as we aggressively reduce global expenses and optimize our retail footprint. These savings will dramatically accelerate our strategic reinvention, which is focused on driving growth in our delivery businesses and in categories beyond office supplies.”

Staples and Office Depot previously agreed to merge in 1996, but the deal was blocked by the government, when officials deemed it anticompetitive. The FTC approved the merger between Office Depot and OfficeMax in 2013 (which combined the second- and third-largest office supply chains), citing a changing landscape of competition from e-commerce websites like Amazon as well as big-box stores such as Wal-Mart and Costco.

Staples’ pending acquisition of Office Depot will likely draw more scrutiny though still could very well be approved. “Office Depot and OfficeMax got their recently completed merger passed by anti-trusters on the theory that their merger would produce a stronger competitor to Staples,” Erik Gordon, a professor at the University of Michigan’s Ross School of Business, told Bloomberg.com. “Office Depot will have to convince the government of its claim that eliminating the competition with Staples poses no threat to prices because of competition from Wal-Mart and Internet players. That won’t be easy.”

Staples secured a $3 billion credit facility and a $2.75 billion six-year term loan financing to fund the deal. The company will offer a 44% premium to Office Deport shareholders over the stock price on February 2 before news of the talks was reported.