Corporate Express rejects Staples bid; but will talk

By Aarthi Sivaraman and Gilbert Kreijger

NEW YORK/AMSTERDAM (Reuters) - Corporate Express CXP.AS on Tuesday rejected a sweetened offer from U.S. office supplies retailer Staples Inc (SPLS.O) 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.