Staples Proposes Acquisition of Corporate Express Ordinary Shares

Yesterday, Staples (SPLS) informed us that they have made a proposal to acquire all ordinary shares of Corporate Express (CXP) for a price per share of EUR 7.25, representing a total enterprise value of approximately EUR 2.5 billion. The proposal has not been discussed with Corporate Express shareholders and management and the letter to Mr. Ventress, the CEO of Corporate Express, was included in the announcement. From the letter it is clear that Staples has already made some earlier attempts to engage in discussions with Corporate Express, and it seems that Corporate Express has resolutely refused discussions about an acquisition.

I believe the proposal made by Staples is not convincing, and will stand little chance of success. Shareholders of Corporate Express seem to agree with this view when the price climbed to well over EUR 7.50 immediately after the proposal was made public. Staples also informed us that any dividend declared before closing of the transaction will be subtracted from the offer price. Staples explains that they believe the offer is very fair, highlighting the fact that the premium is 67% above the closing price of EUR 4.32 on February 4^th, the last day before rumors circulated in the market about a possible offer. The offer is also approximately 33% above the closing price of Corporate Express on February 18^th. I believe Staples also understands that this is just the beginning of the acquisition process.

Corporate Express has some big shareholders who will most likely not be impressed with this initial offer, now Staples has finally indicated to see value in a combined company. According to the latest disclosures, bank/ insurance groups Fortis and ING are holding significant shares in the company , while we can also expect investment companies Centaurus and AllianceBernstein to try to squeeze as much as they can out of this opportunity. It is not unlikely that Staples will have to increase its offer to the EUR 8-9 range to convince these large shareholders.

It will also be interesting to see what the reaction of the management of Corporate Express will be. Will they come with the obvious statement that they believe the offer from Staples does not do justice to the true value of Corporate Express, and open the door to negotiations, or will they be more outspoken and maybe bring other alternatives into play.

Comments

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Anyone know how interested Staples is in CE's new Sustainable Earth line of cleaning chemicals