Staples offer upper limit of fair price

 office chairs The final $2.7 billion offer for the Dutch stationer Corporate Express was near the upper end of what the Staples believed was a fair price, Tootoo.com has learned from a company insider. Dan Davidowitz, a portfolio manager with Polen Capital Management, which holds about $18 million worth of Staples shares, made the comments upon the announcement of the deal on June 11.If European regulators approve and the deal closes as expected next month, the U.S. firm would also assume about $1.7 billion in Corporate Express' debt, in addition to buying up the company's shares. "We like the deal, especially now that it's friendly, and the companies can move quickly to get it done and integrate," Davidowitz said. Staples shares rose $1.23, or 5.3 percent, to $24.38. American Depositary Shares of Corporate Express rose 38 cents, or 2.7 percent, to $14.38. With a combined 94,000 employees, the company will be bigger than Delray, Florida-based Office Depot Inc. and Naperville, Illinois-based OfficeMax Inc., were those two companies to combine their work forces of 49,000 and 35,000, respectively. The Staples-Corporate Express combination also would exceed the two smaller firms in combined annual revenue, with more than $27 billion — $19.4 billion for Staples last year and $8.8 billion for Corporate Express — compared with $24.6 billion for Office Depot and OfficeMax. One analyst said an Office Depot-OfficeMax tie-up could eventually be on the horizon as the rivals try to compete against a newly enlarged Staples, which would add Corporate Express' 18,000 employees to its 76,000, and be less reliant on its core retail business. "Office Depot and OfficeMax might someday be thinking about that," said Anthony Chukumba, a U.S. securities analyst with FTN Midwest Securities. With Staples' addition of Corporate Express' business serving large companies that receive office supplies under contract, "Now, suddenly, Office Depot and OfficeMax will have to compete with Staples in the contract business," Chukumba said. Shares of the chief U.S. office products suppliers declined last year as the slumping U.S. economy hurt retail sales. But Staples, with a 14 percent stock decline, didn't do as poorly as its rivals, with Office Depot dropping 64 percent and OfficeMax 59 percent. And while Staples has suffered disappointing U.S. retail sales, the chain of more than 2,000 stores has enjoyed strong international results, and growth in its delivered office products for mostly small and mid-sized businesses. Corporate Express sells only to companies, with a focus on big corporations. The combined company will sell office products in 28 countries, up from Staples' current 22, and give Staples a bigger presence in Europe, as well as entry into Australia and New Zealand. Corporate Express Chief Executive Peter Ventress will head Staples' international operations, which will be headquartered in Amsterdam. Corporate Express said Staples agreed under Wednesday's agreement "that they have no plans to make material reductions to the overall work force." Sargent said Staples faces no specific prohibition limiting job cuts to a certain number in a deal he said would help both companies become more efficient without large cuts. The companies have little operational overlap where job cuts could be made, other than in U.S. contract office supplies, Sargent said. We're not handcuffed at all," he said. Until the deal closes, Sargent said he could not offer predictions on how much in savings the companies expect from pairing up, or when the deal might add to Staples' earnings.