AMSTERDAM U.S. office supplies company Staples Inc has won its battle to buy Corporate Express NV and extend its dominance of the world's office products market after the Dutch firm agreed to a sweetened bid of 1.7 billion euros ($2.65 billion).
Staples on Wednesday said it had raised its all-cash bid to 9.25 euros per share from the 9.15 euros it offered last week. Its first offer, in February, was 7.25 euros per share.
Corporate Express, an office supplies wholesaler, said it has terminated a deal to buy privately owned French rival Lyreco, a pact seen as an attempt to fend off Staples.
Shares of Corporate Express rose 1.4 percent to 9.20 euros, almost triple the five-year low of 3.18 euros they touched in January before the takeover battle began. Staples shot up 4.4 percent, or $1.02, to $24.17 on Nasdaq.
For Staples, the deal expands its presence in the company contracts business in Europe and North America, where it competes with Office Depot and OfficeMax as well as Corporate Express.
"Staples will dwarf other office supply distributors," Credit Suisse analyst Gary Balter said in a research note.
"The acquisition will move Staples to a leadership position in the contract (large company) segment in North America and will create a solid base on which to build its global contract footprint, with a No. 2 position in Europe and a No. 1 position in Asia-Pacific," Balter added.
Analysts said a tie-up between Staples, a retailer, and Corporate Express, a wholesaler, makes strategic sense and could lead to big savings in the slowing U.S. economy. Balter estimated at least $250 million in cost savings over three years.
HOSTILE TO FRIENDLY
Sanford Bernstein analyst Colin McGranahan said increasing the offer was a fair price to pay to win over Corporate Express and turn the deal to friendly from hostile.
"A hostile scenario would likely have resulted in significant management turnover at Corporate Express," McGranahan said in a research note.
Corporate Express will pay a 30 million euro break-up fee to Lyreco, which said last week it had considered a counterbid for Corporate Express but market conditions were not favorable.
Lyreco Chief Executive Eric Bigeard told Reuters his firm would review its options for expanding in North America and consider acquisitions in Europe and the Asia-Pacific region.
Petercam analyst Fernand de Boer said, "Corporate Express is simply being realistic; they did what they had to do. I think it is more than fair value for Corporate Express."
Staples said the companies have combined annual revenue of $27 billion and more than 94,000 employees in 28 countries. By contrast, Office Depot has annual sales of $16 billion and OfficeMax reported 2007 sales of $9.1 billion.
Corporate Express said its boards unanimously recommended the offer. It said it would still hold a shareholders meeting on June 18, but there would no longer be a vote on the proposed Lyreco deal.
While Dutch regulations meant Staples could not raise its bid again after it offered 9.15 euros last week, it bought about 1.1 percent of Corporate Express shares at 9.25 euros each in an off-market transaction, meaning it has to pay that for the rest.
Staples said it now owns 13.4 percent of the company's ordinary shares, and holders of about 23.3 percent have committed to accept Staples' offer, which it will declare unconditional if it gets 51 percent of the shares.
Corporate Express Chief Executive Peter Ventress will take a new position as president of Staples International to oversee business outside North America and play a key role in managing the integration of the companies.
The deal is expected to be completed in July.
In recent months, Corporate Express faced growing pressure from activist investors because of poor performance in the United States, where it generates 50 percent of its sales.
It is just the latest in a slew of Dutch companies to be bought by a foreign rival, including bank ABN AMRO, electrical goods supplier Hagemeyer and food company Numico. Few government barriers to takeovers and a liberal Dutch corporate governance code have made Dutch companies desirable targets.
Lehman Brothers Holdings Inc is providing Staples with financial advice; Clifford Chance LLP and WilmerHale LLP are providing legal and tax advice; and Weil Gotshal & Manges LLP is providing antitrust advice.
Deutsche Bank and JP Morgan advised Corporate Express.
(Additional reporting by Karen Jacobs in Atlanta, Astrid Wendlandt in Paris and Mathieu Robbins in London; Editing by Jason Neely, Elizabeth Fullerton and John Wallace)