Staples' European hostile bid: rare and a long shot

By Jessica Hall

NEW YORK (Reuters) - When office-supply retailer Staples Inc (SPLS.O: Quote, Profile, Research, Stock Buzz) on Monday launched its $2.34 billion (1.5 billion euro) hostile takeover offer for Corporate Express NV (CXP.AS: Quote, Profile, Research, Stock Buzz), it brought a new level of brash deal-making to the recent wave of unsolicited bids.

Staples made an all-cash offer for a reluctant European target at a time when the U.S. dollar remains weak compared with the euro. It also pushed ahead with its bid despite the historical trend of failure for hostile trans-Atlantic bids.

"The Staples bid is unusual, but will probably not set off a wave of near-term U.S. cross-border acquisitions," said Allen Michel, professor of finance and economics at Boston University's School of Management.

This year has been marked by an increase in unsolicited bids, but trans-Atlantic hostile offers remain rare.

"Hostile deals are more difficult to get done. There's more uncertainty around the execution of a hostile than there is around the execution of a friendly deal," said Joseph Frumkin, a partner with Sullivan & Cromwell LLP in New York.

"Doing a cross-border hostile is even more difficult because it adds one more layer of difficulty and uncertainty around getting a deal done," said Frumkin, who focuses on U.S. and cross-border mergers and acquisitions.

During the first quarter, unsolicited offers represented 25 percent of all announced deals in the United States, up from 18 percent of deal volume in the year-ago quarter, according to FactSet MergerMetrics.

The first quarter offers included Microsoft Corp's (MSFT.O: Quote, Profile, Research, Stock Buzz) bid for Yahoo Inc (YHOO.O: Quote, Profile, Research, Stock Buzz), United Technologies Corp's (UTX.N: Quote, Profile, Research, Stock Buzz) offer for Diebold Inc (DBD.N: Quote, Profile, Research, Stock Buzz), and Electronic Arts Inc's (ERTS.O: Quote, Profile, Research, Stock Buzz) bid for Take-Two Interactive Software Inc (TTWO.O: Quote, Profile, Research, Stock Buzz).