Corporate Express makes move to halt takeover

Rocky staff and wire

Published May 21, 2008 at 11:08 a.m.
Updated May 21, 2008 at 11:08 a.m.

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Office supplies distributor Corporate Express showed its determination to fend off a hostile takeover by Staples on Wednesday, announcing plans to instead buy French peer Lyreco SAS for about $2.7 billion in cash and shares.

If approved by shareholder and regulators, a Corporate Express-Lyreco combination would create a sizable international competitor to Massachusetts-based Staples. Corporate Express-Lyreco would be larger than Staples in business-to-business sales in the U.S., Europe and Asia.

Lyreco, like Corporate Express and unlike Staples, sells office supplies only to other businesses.

Corporate Express was a Colorado-based public company until its 1999 purchase by Dutch company Buhrmann NV. Corporate Express maintains its U.S. headquarters in Broomfield, with 1,761 employees spread among two corporate offices, an Aurora distribution center and a national call center. Founder Jirka Rysavy went on to start the lifestyle-products company Gaiam.

Corporate Express’ board rejected a $2.47 billion takeover offer from Staples last week, saying it undervalued the company. Staples took its hostile bid directly to Corporate Express shareholders on Monday.

On Tuesday, Staples Chairman and Chief Executive Ron Sargent suggested in a conference call to discuss earnings that Staples won’t stretch its campaign beyond the June 27 date it has set for Corporate Express shareholders to tender their shares in support of the deal.

Staples is offering 8 euros ($12.53) per Corporate Express share, and the Dutch company’s stock fell 4.4 percent to 7.75 euros ($12.14) Wednesday in Amsterdam after the alternate deal for Lyreco was announced.

“This is the most logical and compelling merger one could envision in our industry,” said Corporate Express CEO Peter Ventress in a statement. “The two businesses are highly complementary.”

The price Corporate Express is paying for Lyreco is more than its own market capitalization of 1.4 billion euros ($2.2 billion) as of Wednesday morning, and the Dutch company would issue shares, pay cash and take on debt to fund the acquisition.

It said that it would pay Lyreco shareholders 102.5 million new ordinary shares, representing 29.9 percent of its outstanding capital, 560 million euros ($877 million) in cash and 340 million euros ($532 million) in debt. The share component is worth around 830 million euros ($1.30 billion) at Corporate Express’s closing price Tuesday.

Analysts said the move was a crafty way for Corporate Express to take advantage of its share price — which has nearly doubled since Staples began courting it in February — to thwart the American company.

“Although there is a strategic rational to merge with Lyreco, it also illustrates Corporate Express’ attitude toward the Staples offer and that it will do anything to avoid the takeover,” wrote Petercam analyst Fernand de Boer in a reaction.

He said it was impossible to tell whether Staples will stand pat, start buying shares on the open market, increase its offer, or walk away.

De Boer advised investors to sell Corporate Express shares now, with an eye to scenarios where Staples does pull out.

If the current offers stand, Corporate Express shareholders will have a chance to choose which they prefer at the company’s annual meeting in late June.

Lyreco had 2007 sales of 2.2 billion euros ($3.4 billion) in 2007, compared to 5.6 billion euros ($8.8 billion) for Corporate Express and $19.4 billion for Staples.

Lyreco has 10,000 employees, compared to 18,000 for Corporate Express.

Their joint statement Wednesday treated the takeover as a merger of near-equals. The Corporate Express and Lyreco boards support their deal.

Ventress would become chief operating officer of the combined company, making way for Lyreco’s Chief Executive Eric Bigeard as CEO of the combined company.

Corporate Express would provide four of six supervisory board members, and the chairman.

The company would be incorporated in the Netherlands, with main operating headquarters in France.

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