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Corporate Express (CXP)
Corporate Express Agrees to Staples' Offer
They say the "third time's a charm" but it took four attempts before Corporate Express was compelled to accept Staples' (SPLS: Charts, News, Offers) takeover bid. Corporate Express announced today that it will recommend the buyout to its shareholders, after proposing very different strategic plans just weeks ago. This change of heart comes as somewhat of a surprise to those keeping an eye on the story, leaving many wondering why the company has suddenly embraced the deal. What was Staples able to do to finally win over Corporate Express?
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Corporate Express, an office supplies company based in the Netherlands, has agreed to Staples' sweetened takeover bid, after leaving three previous offers on the table. The latest offer of $14.36 per share, or $2.65 billion, values the company at around $4.8 billion, including Corporate Express debt. The deal equates to 9.25 Euros per share, which seems to be the magic number for CXP after rejecting the previous bids. The original offer of 7.25 Euros per share was increased to 8 Euros per share then raised once more to 9.15 Euros per share on June 3. Two days later, Corporate Express confirmed that they had engaged in negotiation talks with Staples to further consider the deal.
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Aside from the sudden decision to accept the deal after three prior rejections coming as a surprise, many are also wondering what happened to the strategic plans Corporate Express had announced last month. At the same time that Staples raised their bid to 8 Euros per share, Corporate Express announced plans to merge with French company Lyreco. Many viewed this move as a defensive play to either evade Staples' advances or make them raise the offer price. Corporate Express investors would have been forced to decide between the two deals at the next shareholders meeting on June 18, in effect plotting the course for the future of the company. There was a lot of pressure to pursue the Lyreco purchase even though the outcome would have been riskier than accepting the Staples deal. Corporate Express has now announced that they are calling off the Lyreco deal completely, resulting in a $46 million breakup fee due to Lyreco.
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While the significant increase in offer price from the initial bid to the accepted deal would certainly tip the scales in Staples' favor, other factors have played into the decision. Staples is currently the world's largest seller of office supplies in terms of retail strength in the U.S. market. Corporate Express, on the other hand, is the world's largest distributor of office supplies because it sells only to companies and not consumers. The combination of the two companies will create the biggest office supply company on the globe and allow Staples to push even farther past rivals Office Depot (ODP: Charts, News, Offers) and OfficeMax (OMX: Charts, News, Offers). Ron Sargent, Staples' chairman and CEO said, "We have tremendous respect for Corporate Express, and we know they share our passion for outstanding customer service. Bringing together these two great companies is a win for customers, employees and shareholders, and I look forward to working with [Corporate Express CEO] Peter Ventress and his team." Corporate Express shareholders are also looking forward to the deal and are likely to approve it at next week's meeting. The company's stock price has surged since Staples' first offer in February when shares were trading at around 4 Euros.
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