UPDATE 5-Corp Express fights Staples bid with French buy

(Adds Staples reaction, analyst's comment, more detail; updates shares)

By Astrid Wendlandt and Gilbert Kreijger

PARIS/AMSTERDAM, May 21 (Reuters) - 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 euros.

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 shareholders.

"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 note.

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 euros.

"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.

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