BOSTON—Corporate Express NV on Thursday stopped fighting a string of hostile takeover bids by its larger office products rival Staples Inc. and agreed to enter talks, a reversal that came two days after Staples sweetened its third offer to $2.6 billion.
In talking with Staples, Netherlands-based Corporate Express signaled it could potentially scuttle an alternative proposal it reached two weeks ago to acquire French-based rival Lyreco SAS for $2.7 billion.
That deal would pose a competitive threat to Framingham, Mass.-based Staples, which wants Corporate Express for its profitable business as an office products supplier to big companies in the U.S., Europe and Australia.
Corporate Express issued a brief news release saying it “has invited Staples to enter talks in order to receive further clarification and exchange information.”
Two hours later, Corporate Express spokeswoman Anneloes Geldermans confirmed the two companies had begun discussions.
Lyreco Chief Executive Eric Bigeard said in a phone interview that he was still “confident” about his privately held company’s prospects of being acquired by Corporate Express, and will keep communicating with the Dutch company’s shareholders in hopes of finalizing a deal. But Bigeard said he was unsurprised to learn the Dutch company had agreed to talks with Staples after the latest bid.
“It was their fiduciary duty to open talks under the circumstances,” he said.
Staples did not return phone calls seeking comment.
Corporate Express’ statement came after it said it would “carefully review” the latest Staples bid on Tuesday to acquire it for a per-share price of $14.21, or 9.15 euros.
That all-cash bid for a total 1.67 billion euros in cash was up 26 percent from Staples’ initial bid of 7.25 euros per share on Feb. 19. Staples’ second offer of 8 euros per share also was rejected as too low, on May 19.
Two days later, Corporate Express moved to thwart Staples by announcing its proposed acquisition of Lyreco, saying that cash-and-stock deal would offer better prospects than being acquired by Staples. Shares of Corporate Express are now worth more than twice what they were when rumors of a Staples bid began circulating in early February, a rise that gave Corporate Express financial leverage to make its bid to buy Lyreco.
The Lyreco acquisition is scheduled to come before a June 18 vote of Corporate Express shareholders, who will also discuss the rival Staples bid. Staples’ offer requires 51 percent approval, and also hinges on Corporate Express shareholders rejecting the Lyreco deal. The Dutch company could have to pay a $47 million break-up fee to Lyreco if it pairs with Staples.
The U.S. firm, which brought its bid directly to Corporate Express shareholders, said Wednesday it had moved closer to the 51 percent approval threshold after buying 12.3 percent of Corporate Express’ shares. Voting rights for the those shares give Staples backing from a total 35.6 percent, including the commitments Staples said it has from other investors holding 23.3 percent of Corporate Express shares.
“They only need another 15 percent, and I don’t think they’re going to have any problems getting that,” said Anthony Chukumba, a U.S. securities analyst with FTN Midwest Securities.
However, if talks with Staples trip up, Corporate Express management could potentially still try to scuttle a deal by taking “poison pill” measures to thwart Staples, such as issuing new shares to delay the process.
“That is always an outside chance, so I don’t think it’s yet 100 percent that this deal will happen,” Chukumba said
Both rivals are trying to rebound from a slow U.S. economy that has hurt U.S. office products sales, and many analysts say a deal could benefit both companies by helping them cut costs.
The U.S. headquarters of Corporate Express are in Broomfield, Colo.
Staples, the world’s largest office products retailer with more than 2,000 stores and 76,000 employees, wants Corporate Express’ strength serving big corporate customers to add to its greater presence among small and mid-sized companies. Staples also wants to bolster its international operations.
Corporate Express has no retail operations, but runs a contract office supply business in 20 countries, with total sales of more than $8 billion in 2007. About half those sales came in the U.S. and Canada, and about half the company’s 18,000 employees are in the U.S.
Corporate Express was known as Buhrmann NV until last year, when it changed its trading name to that of its most well-known brand, the Colorado-based corporation it acquired in 1999.
Staples shares rose 2 cents to $24.06 in afternoon trading Thursday. American Depositary Shares of Corporate Express rose 13 cents, or nearly 1 percent, to $14.05.
