Corp Express fights Staples bid with French buy
PARIS/AMSTERDAM (Reuters) - Dutch office supplier Corporate Express CXP.AS is seeking to buy French rival Lyreco for 1.4 billion euros ($2.2 billion) in cash and equity, as it fends off a hostile bid from U.S. rival Staples Inc. (SPLS.O).
Including a vendor loan to Lyreco, the deal's enterprise value is 1.73 billion euros, the companies said in a statement.
Corporate Express is paying Lyreco shareholders with 102.5 million of newly issued shares or 29.9 percent of its total outstanding capital, as well as 560 million euros in cash.
Corporate Express shares fell almost 9 percent and traded down 4.4 percent to 7.75 euros by 0837 GMT.
"There is a risk that Staples will withdraw its offer of 8 euros per share, pushing shares down," said Theodoor Gilissen analyst Johan van den Hooven, adding that there was still a chance that Staples might raise its offer to lure investors.
The Lyreco deal, of which Reuters had earlier on Wednesday obtained details, would make Corporate Express less sensitive to the U.S. economy, where it has seen shrinking sales in 2007 and rival Office Depot (ODP.N) has warned of weakening economic conditions.
The combined company would better weather weaker economic conditions and demand, said Lyreco Chief Executive Eric Bigeard. "Volume and size helps in this business," he told reporters.
Staples formally launched its 1.5 billion euro unsolicited bid for Corporate Express on Monday, which the company rejected as too low. Investors can tender their shares until June 27.
Corporate Express said it would seek shareholders' approval for the deal at an extraordinary meeting in the second half of June, making it likely that shareholders will have to choose between selling to Staples or approving the Lyreco merger.
Analysts said the Lyreco deal would benefit Corporate Express but interpreted it as a defensive move to fend of Staples' bid.
At the same time, they said it was difficult to guess how shareholders would choose between a certain cash bid and uncertain growth prospects.
They added that the deal was not cheap, since Corporate Express was valuing Lyreco at about 10 ten times operating profit, while the rest of the industry trades at around 7.5.
"It remains to be seen whether it will get shareholders approval for the deal," said Fortis analyst Maarten Bakker. "I have doubts about this."
The deal will create Europe's biggest supplier of office products to businesses with 7.8 billion euros in combined sales, the companies said.
Lyreco's Bigeard will become CEO of the combined group, while Corporate Express CEO Peter Ventress will become Chief Operating Officer.
The deal will add to earnings from 2009, and Corporate Express lifted its guidance for 2008, to combined sales of between 8 billion and 8.2 billion euros. Staples had 2007 sales of $19.4 billion.
Corporate Express's Ventress said that talks on the deal began in early 2008 and that the company "absolutely would have done the deal without the Staples bid".
"The two companies have spoken on many occasions in the past few years," Ventress told reporters on a conference call.
Lyreco's board and its shareholders supported the acquisition and the combined group.
Corporate Express reiterated on Monday that Staples' offer at 8 euros per share was too low and Staples said it launched an offer because the Dutch firm was unwilling to negotiate.
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