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 user 2008-05-16 at 12:42:51 pm Views: 60
  • #19597
    Staples closes in on Corporate Express
    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

    Corporate Express had 5.6 billion euros of sales in 2007.
    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.