Staples, Inc. (SPLS), the biggest office supply company in U.S., on Tuesday said it raised its takeover offer price for its Dutch rival Corporate Express N.V. (CXP) to 8.00 euros per share. The initial price of 7.25 euros per share was rejected by Corporate Express, saying it significantly undervalues the firm. Framingham, Massachusetts-based Staples noted that it expects to launch the formal offer, with a minimum acceptance condition of 75% of the ordinary share capital, following receipt of the offer memorandum from the Netherlands Authority for the Financial Markets.
Commenting on the offer revision, Ron Sargent, Chairman and Chief Executive Officer of Staples, stated, "Given the unwillingness of Corporate Express to negotiate a transaction, we will make our offer directly to shareholders. Today we announced a highly attractive offer for Corporate Express at a compelling valuation. We are offering certain cash value versus the considerable uncertainties of management's long range guidance."
Staples noted that shareholders have received a dividend of 0.21 euro per Corporate Express ordinary share since the February 19 announcement of the earlier offer with a total enterprise value of about 2.5 billion euros, equivalent to $3.67 billion.
Including the dividend, Staples' revised offer represents a premium of about 90% to Corporate Express' share price of 4.32 euros on February 4, 2008, the day before market speculations of a potential offer for Corporate Express. The new offer also represents a premium of about 51% to Corporate Express' closing share price of 5.43 euros on February 18, 2008, the day before Staples' first proposal to buy Corporate Express.
Staples' previous offer represented a premium of about 67% to Corporate Express' Feb. 4, closing share price, and a premium of approximately 33% to Corporate Express' closing share price on February 18.
Office-supply retailer Staples in mid-March had confirmed its first offer, to which Corporate Express also confirmed its rejection.
Staples now pointed out that it has extended multiple invitations, the latest being on last Friday, to Corporate Express' Boards for constructive discussions regarding its offer. The Boards have refused to negotiate the merits of Staples' proposals.
According to Staples, it continues to believe that the proposal is the most valuable option available to Corporate Express' shareholders given the uncertainty surrounding a turnaround plan. The offer will also provide significant benefits to Corporate Express' customers and employees, Staples said.
Staples noted that since its initial offer, it has obtained antitrust clearance in the United States, met with Dutch trade unions, and submitted to the Netherlands Authority for the Financial Markets, i.e., Stichting Autoriteit Financiële Markten or 'AFM' a request for approval for a draft offer memorandum.
Staples also has initiated the required regulatory processes in Europe and Canada. The company said it expects to launch a formal offer following receipt of approval of the offer memorandum from the AFM.
Further, Staples has set a minimum acceptance condition of 75% of the ordinary share capital. In addition, Staples confirmed that it expects to make an offer for both the Corporate Express depositary receipt of preference shares A and the 2% subordinated convertible bonds due 2010 issued by Corporate Express.
In early April, Staples announced that it has entered into a definitive $3 billion credit agreement with financing arranged by Lehman Brothers Inc., Bank of America and HSBC Bank USA for its planned public offer for Corporate Express. The company then noted that the $3 billion financing, together with its cash reserves and existing revolving credit facility, would be sufficient to finance the acquisition of Corporate Express.
The Dutch office supply wholesaler earlier had noted that the Staples' proposal fails to reflect Corporate Express' prospects, and that the company does not believe the offer is in the best interests of its shareholders and other stakeholders. The company also reiterated its commitment to pursuing its declared strategy.
Very recently, on May 7, while announcing the company's first quarter results and future prospects, Corporate Express CEO Peter Ventress said, "Today we're providing additional disclosure that underpins our expectations for the coming years and lays out the future financial benefits of our strategic plan. We are full of confidence that our actions and strategic priorities put us in a robust position to outperform our market. The unsolicited proposal of Staples significantly fails to reflect Corporate Express' prospects, its valuable customer base and its excellent market positions."
In its first quarter, Corporate Express posted a decline in net result to 8.5 million euros or 0.05 euro per share from 15.9 million euros or 0.09 euro per share a year ago. Net sales also fell 5.5% to 1.36 billion euros from 1.44 billion euros last year, while increased 0.9% at constant rates.
Peter Ventress then added that its first-quarter results provide evidence of the potential of its strategic plan, and that its North American business, its key market, is outperforming the sector under difficult market circumstances. North American organic sales growth of 2% outperformed the market.
Corporate Express has been under pressure from hedge funds to put itself up for sale after losses in the United States. The company generates around half of its revenue in the United States and has seen increasing pressure on margins and market share shrink.
For the fiscal 2008, Corporate Express expects sales to be 5.7 billion euros to 5.8 billion euros. The company also continues to expect its Global Office Products businesses to grow its organic sales on average by 6% in 2008-2010, and Group sales, including all other activities, to reach around 6.8 billion euros in 2011, including sales for North America of US$ 5.1 billion, and European sales of 1.8 billion euros.
On April 16, Corporate Express agreed to sell Veenman Nederland to Xerox Corp. (XRX) for 43 million euros, which indicated a further step in its drive to become a more focused Global Office Supplies company. The activities of Veenman Germany were sold in 2007.
SPLS closed Monday's regular trading session at $21.96, up $0.46 or 2.14%, on a volume of 8.5 million shares.
CXP settled at $12.20 on Monday, up $0.55 or 4.72%, on a 17 thousand share volume.
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