(Adds Staples reaction, analyst's comment, more detail; updates
By Astrid Wendlandt and Gilbert Kreijger
PARIS/AMSTERDAM May 21 Dutch office equipment
supplier Corporate Express CXP.AS said it would buy French
rival Lyreco in a move that could help it fend off the bid
attentions of U.S.-based Staples (SPLS.O).
The Dutch firm's deal to buy privately-owned Lyreco,
reported by Reuters ahead of the official announcement, is worth
1.7 billion euros ($2.2 billion) at current share prices
including cash, shares and a vendor loan note of 340 million
It would create the largest business-to-business distributor
of office supplies in Europe, North America and Asia Pacific
with combined annual sales of more than 7.8 billion euros.
Shares in Corporate Express fell below the Staples offer
price of 8 euros a share as investors questioned whether the
hostile approach could still be successful.
Staples said it would keep its options open and reaffirmed
that its offer delivered value to the Dutch company's
"It is unlikely that Staples will raise its offer and it
looks like the market also thinks that," said a financial source
close to the Lyreco deal.
Analysts agreed. "Corporate Express has pulled a rabbit out
of the hat in the form of the Lyreco deal," ABN Amro said in a
Corporate Express reiterated on Monday that Staples' offer
at 8 euros per share was too low -- even after it had been
raised from 7.25 euros.
Corporate Express is offering Lyreco's shareholders new
Corporate Express shares amounting to 29.9 percent of its
enlarged shareholder capital, plus 560 million euros in cash and
the 340 million euro vendor loan note. The issue of 102.5
million new Corporate Express shares is worth 806.82 million
euros at the current market price.
Lyreco founder and chairman Georges Gaspard would own 27.4
percent of the newly combined business, while the company's
chief executive, Eric Bigeard, who will head the merged company,
would have a 2.5 percent interest.
Corporate Express shares fell nearly 9 percent shortly after
the deal was announced. But by 1441 GMT, they were down only
1.97 percent at 7.95 euros valuing the company at 1.47 billion
"We believe the deal makes strategic and financial sense,
while it could offer better returns in the longer term than in a
stand-alone scenario or in a Staples takeover scenario," said
ABN AMRO analyst Mark Pieter de Boer.
The Lyreco deal would make Corporate Express relatively less
exposed to the U.S. economy, where its sales declined last year
and where rival Office Depot ODP.N has warned of weaker
"The natural fit of the two companies will create a strong
global platform to further grow our business, backed by the
commitment of the management teams and the support from the
employees of both companies," Bigeard said in a statement.
Founded in 1926, Lyreco is based in northern France and
employs 10,300 people worldwide. Last year, it made earnings
before interest, tax, depreciation and amortisation (EBITDA) of
181 million euros on sales of 2.2 billion euros.
The deal values it at about 9.6 times EBITDA which some
analysts said was a full price for the business, putting the
company at a premium of about 15-20 percent above the industry
Corporate Express Chief Executive Peter Ventress, who would
become Chief Operating Officer of the combined group, said talks
began in early 2008 and the company "absolutely would have done
the deal without the Staples bid".
Corporate Express said the deal would add to earnings from
2009 and the company lifted its 2008 forecast to combined sales
of between 8 billion and 8.2 billion euros. Staples made sales
in 2007 of $19.4 billion.
The Lyreco deal, which will be put to Corporate Express
shareholders' approval in the second half of June, is subject to
a break-up fee of 30 million euros. It also needs regulatory
(Additional reporting by Foo Yun Chee; Editing by Louise