AMSTERDAM (Reuters) - U.S. office supplies retailer Staples Inc <SPLS.O> increased its chances of winning control of Corporate Express NV <CXP.AS> on Tuesday, raising its all-cash bid for the Dutch company to 1.7 billion euros ($2.7 billion).
By Foo Yun Chee
AMSTERDAM (Reuters) - U.S. office supplies retailer Staples Inc <SPLS.O> increased its chances of winning control of Corporate Express NV <CXP.AS> on Tuesday, raising its all-cash bid for the Dutch company to 1.7 billion euros ($2.7 billion).
Staples lifted its offer to 9.15 euros a share from the 8 euros it bid last month, contingent on Corporate Express shareholders rejecting the Dutch company's plan announced last month to buy privately owned French peer Lyreco.
Holders of about 23.3 percent of Corporate Express, one of the world's largest wholesalers of office products, have committed to accept the offer, Staples said in a statement.
!ADVERTISEMENT!Corporate Express said it would carefully review the new offer and make a further announcement in due course, in contrast to its outright rejection of Staples' previous bids.
Analysts have said a tie-up between Staples and Corporate Express, a retailer and wholesaler of office supplies, would make strategic sense and could lead to big savings at a time when both are trying to deal with a slowing U.S. economy.
They said Staples' new bid would probably succeed although Corporate Express could still try to delay it by issuing shares to an independent foundation -- a tactic Dutch industrial group Stork tried unsuccessfully last year and semiconductor equipment maker ASMI <ASMI.AS> used last month.
"We expect a number of shareholders to support the Staples bid, preferring the short-term cash above the longer-term uncertain value," said Petercam analyst Fernand de Boer.
"However, it is not a done deal as we do not exclude preferred shares to be issued."
Corporate Express shares were up 6.8 percent to 8.93 euros by 1052 GMT, outperforming the DJ Stoxx European industrial goods and services index <.SXNP> which was down 0.1 percent.
VOTE ON LYRECO
The Dutch company earlier on Tuesday urged its shareholders to vote for its 1.7 billion euro takeover of Lyreco -- seen as a defense against the unsolicited Staples bid -- and reiterated its view that the earlier bid undervalued the company.
Staples said its new bid values Corporate Express at 9.7 times enterprise value against projected 2008 earnings before interest, tax, depreciation and amortization (EBITDA) and was at a 116 percent premium to the share price on February 4, the day before market talk surfaced of a potential offer for the Dutch company.
Staples originally bid 7.25 euros per share in February.
"Staples' offer provides certain and immediate cash value, without the significant risks found in Corporate Express' long-term business plan, with or without Lyreco," Staples Chief Executive Ron Sargent said in a statement.
Staples said Corporate Express shareholders including hedge funds Centaurus, York Capital and Halcyon had committed to tender their stakes and to vote against the Lyreco plan at a shareholders meeting due on June 18.
It lowered the minimum acceptance threshold to 51 percent from 75 percent and said it expects its offer to close in early July.
Hedge funds and investors have long pressed Corporate Express to seek a buyer or to break up due to falling sales in the United States, where it generates 50 percent of sales and where rival Office Depot <ODP.N> has warned of weaker demand.
In response, the company has added new management and revived U.S. sales. The Lyreco deal would reduce its exposure to the U.S. economy and create the largest business-to-business distributor of office supplies in Europe, North America and Asia Pacific with combined sales of more than 7.8 billion euros.
In addition to wholesaling office supplies, furniture and software, the company provides printing, graphics and related parts and maintenance.
Staples is now offering 3.15 euros per share for Corporate Express <CEXP.AS> preference A shares and 1,332.15 euros per bond for its 2010 convertible bond. Corporate Express had 1.09 billion euros in net interest-bearing debt on March 31. Staples said it had secured a $3 billion credit line for the deal.
Corporate Express trades at 16 times estimated 2008 earnings, compared with Staples at 15.5 times and Office Depot trades at 12.3 times, according to Reuters data.
Lehman Brothers Holdings Inc <LEH.N> is providing Staples with financial advice and Clifford Chance LLP and WilmerHale LLP are providing legal and tax advice.
(Additional reporting by Harro ten Wolde; Editing by Quentin Bryar and David Holmes)
