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 user 2008-05-16 at 12:42:10 pm Views: 52
  • #19670
    Staples closes in on Corporate Express
    May 2008 NEW YORK/AMSTERDAM – Corporate Express  on Tuesday rejected a sweetened offer from U.S. office supplies retailer Staples Inc as still significantly undervaluing the company, but said it was willing to talk.Staples raised its all-cash offer by more than 10 percent to 8 euros per share from 7.25 euros, but Corporate Express said in a later statement it ignored the value of the company and denied its shareholders any share in the synergies that a combination with Staples would yield.”These synergies would be significant. At the price level currently indicated by Staples consequently, all synergies would be for the benefit of the Staples shareholders and none for the benefit of our shareholders,” Corporate Express said in an open letter to Staples.”However, we are happy to discuss our views and your views in more detail,” added the Dutch firm which sells products such as stationery and furniture directly to companies.

    Staples shares closed up more than 2 percent in New York trading late on Tuesday, while Corporate Express shares ended up 6.2 percent, at 8.08 euros.The new offer values Corporate Express at about 1.46 billion euros ($2.3 billion). Including debt, it is worth about 2.6 billion euros. Staples has secured a $3 billion credit line for the deal.Some analysts said the offer might have to rise further, and shares in Corporate Express touched a high of 8.15 euros.Analysts at SNS Securities estimated a higher offer could be worth 8.40 euros per share, while Rabo Securities analysts said it could be 9 euros. UBS analyst David Kerstens said it was unlikely Staples would raise its bid.”We see synergies of about 2.5 euros per share. Based on a stand-alone value of Corporate Express of 5.5 euros, this gives a bid value of around 8 euros.”A tie-up between a retailer and wholesaler of office supplies would make strategic sense and could lead to big savings at a time when both companies are seeking to combat a downturn in the U.S. economy, analysts have said.Staples gets more than half of it sales, totaling $19.4 billion in 2007, through its retail outlets and operates more than 2,000 stores worldwide, but its business-to-business operations are more profitable.”This is where most synergy benefits are possible,” Kerstens said.

    Corporate Express had 5.6 billion euros of sales in 2007.
    Before the Dutch firm made its statement, Staples said its attempt to hold talks with the company, as recently as last Friday, had failed after the board refused to negotiate.”Given the unwillingness of Corporate Express to negotiate a transaction, we will make our offer directly to shareholders,” Staples Chief Executive Ron Sargent said in a statement.”We are offering certain cash values versus the considerable uncertainties of management’s long-range guidance,” he added.Corporate Express trades at about 15 times projected 2008 earnings versus a price-earnings ratio of about 14 for Staples and 12.6 for U.S. rival Office Depot Inc

    Staples said it has made significant progress in preparing for the offer — it has obtained U.S. antitrust clearance, met with Dutch trade unions and submitted a request for approval with the Dutch market regulator AFM.The company said it expected to launch a formal offer after it receives approval from the AFM and to make its offer unconditional if at least 75 percent of shares were tendered.Some Corporate Express shareholders may go to court to force its management to negotiate with Staples if it continues to refuse to talk to Staples, Dutch daily Het Financieele Dagblad reported on Tuesday before the increased offer was announced.Corporate Express has fought off pressure to sell itself from hedge fund investors, installing new management last year who pledged to revive sales while keeping the firm independent.The stock lost more than half its value during 2007 as U.S. sales slumped. It touched a five-year low of 3.18 euros in January but has more than doubled since then on the bid and as it fought back in the United States, where it generates around 50 percent of sales.The company reported operating profit of 50.5 million euros last week and the shares rose as Corporate Express confirmed its ambitious sales growth and margins targets.