AMSTERDAM, Netherlands—Office supplies distributor Corporate Express NV made a surprise move to thwart a hostile takeover by U.S.-based Staples Inc. on Wednesday, announcing plans to instead buy French rival Lyreco SAS for around $2.7 billion in cash and shares.
If approved by shareholders and regulators, the Corporate Express-Lyreco combination would create a sizable international competitor to Staples, one that is larger in business-to-business sales in the U.S., Europe and Asia.
The U.S. office of Corporate Express is in Broomfield, Colo.
Corporate Express’ board rejected a $2.47 billion takeover offer from Staples last week, saying it undervalued the company.
“Would we have done this deal if Staples hadn’t made their bid?” Corporate Express Chief Executive Peter Ventress said on a conference call. “The answer is absolutely yes. This is the most compelling, the most logical merger in our industry.”
The Dutch company said Wednesday both its own and privately held Lyreco’s boards support the new deal.
Framingham, Mass.-based Staples had bid 7.25 euros ($11.37) per share for Corporate Express in February, but raised that to 8 euros ($12.53) and pitched it directly to shareholders, complaining that the company’s management was not willing to negotiate.
Staples said in a statement Wednesday that its bid “delivers certain, immediate and superior value to Corporate Express shareholders … without the substantial execution and other risks inherent in Corporate Express’ long-term plans, with or without the addition of Lyreco.”
On Tuesday CEO Ron Sargent said Staples suggested he had no plans to raise its bid.
“At this point, we’re going to let (Corporate Express) shareholders decide if 8 euros ($12.53) is a fair price,” he said. “And if the shareholders reject our offer, then we move on.”
Anthony Chukumba, an analyst with FTN Midwest Securities, said Corporate Express shareholders now face a tough choice in deciding whether they’ll get a greater return from their shares from the Lyreco deal or from Staples’ offer.
“I think it’s really up to the Corporate Express shareholders right now. If they approve this transaction (with Lyreco), I think it’s fair to say the Staples deal will not happen.”
The Dutch company’s stock closed 1.5 percent lower at 7.99 euros ($12.53) on Wednesday in Amsterdam.
Corporate Express said it would pay Lyreco shareholders 102.5 million new ordinary shares, representing 29.9 percent of its outstanding capital, 560 million euros ($877 million) in cash and 340 million euros ($532 million) in debt. The share component was worth around 830 million euros ($1.30 billion) at Corporate Express’s closing price Tuesday.
Analysts said the move was a crafty way for Corporate Express to take advantage of its share price—which has nearly doubled since Staples began courting it—to thwart the American company.
“Although there is a strategic rational to merge with Lyreco, it also illustrates Corporate Express’ attitude toward the Staples offer and that it will do anything to avoid the takeover,” wrote Petercam analyst Fernand de Boer in a reaction.
Analyst Chukumba said a higher bid from Staples “is possible but not likely.”
“To bid against yourself is highly unusual. It really depends on how much Staples wants to own this asset.”
De Boer advised investors to sell Corporate Express shares now, with an eye to scenarios where Staples does pull out.
If the current offers stand, Corporate Express shareholders will have a chance to choose which they prefer at the company’s annual meeting in late June.
The deal announced Wednesday contains a 30 million euro ($47 million) breakup fee for Lyreco in case it falls through.
Lyreco had 2007 sales of 2.2 billion euros ($3.4 billion) in 2007, compared to 5.6 billion euro ($8.8 billion) for Corporate Express and 12.4 billion euros ($19.4 billion) for Staples.
In the Lyreco-Corporate Express deal, Ventress would become chief operating officer of the combined company, making way for Lyreco Chief Executive Eric Bigeard as CEO of the combined company.
Corporate Express would provide four of six supervisory board members, and the chairman.
The company would be incorporated in Amsterdam, Netherlands, with operating headquarters in Marly, France.
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AP Business Writer Mark Jewell in the Boston bureau contributed to this story
