Corporate Express NV, the biggest distributor of office supplies directly to corporations, agreed to buy French competitor Lyreco SA for 1.73 billion euros ($2.73 billion) as the Dutch company resists a bid from Staples Inc.

Chief Executive Officer Peter Ventress today said the Amsterdam-based company's purchase was ``unrelated'' to the approach from Staples, the biggest retailer of office supplies. Lyreco's controlling Gaspard family will get 25 percent of Corporate Express and can't sell that stake for two years.
Corporate Express will gain Lyreco's Impega brand and will save as much as 100 million euros after three years. Staples, which had its 1.46 billion-euro offer rejected last week, said it was ``considering all options'' amid speculation the U.S.- based owner of more than 2,000 stores may walk away. Staples has pursued the Dutch company for three months, seeking more direct sales as U.S. small businesses buy less stationery.
``What this does is potentially prolong the process for everybody,'' said Scott Tilghman, an analyst at Soleil Securities Corp. in Baltimore, who rates Staples ``buy'' and doesn't own the shares. ``This may have coincided with the offer from Staples, as the company looks for other ways to keep shareholders happy,'' he said.
Corporate Express fell 12 cents, or 1.5 percent, to 7.99 euros in Amsterdam, reducing this year's gain to 49 percent. Staples, based in Framingham, Massachusetts, dropped 66 cents, or 2.8 percent to $22.95 at 4 p.m. New York time in Nasdaq Stock Market trading.
---------‘Certain value’
Staples has taken its bid directly to Corporate Express investors, who have until June 27 to tender, and today said its proposal offers ``certain, immediate and superior value.'' Staples said yesterday that it expects the U.S. slump to last the rest of 2008, and said buying the Dutch company would help expand its most profitable division globally. Lyreco Chief Executive Officer Eric Bigeard will take over the top job at Corporate Express and own a 2.5 percent stake. Corporate Express generates more than twice Lyreco's sales and gets most of its revenue in North America. The statement said Lyreco's clients are mostly ``mid-sized'' and European.
``This is the most logical and compelling merger,'' Ventress said, declining to comment further on Staples' offer.
There's no ``constraint'' to possible discussions between Corporate Express and Staples after the takeover, Lyreco's Bigeard said at an Amsterdam press conference. Lyreco has been a Staples partner in the U.S. for 15 years, and that arrangement will be scrapped after the merger, Bigeard said.
The deal ``appears to thwart Staples,'' said Martijn den Drijver, an analyst at SNS Securities in Amsterdam, in an e- mailed note.
``The merged company will have too rich a valuation for Staples.'' He rates Corporate Express ``accumulate.''
Shareholders of Corporate Express, which started talks with Lyreco ``early this year,'' will be able to vote on the Lyreco purchase at an upcoming shareholder meeting, Ventress said. He declined to say if the meeting will take place before or after June 27, when Staples' tender expires. The deal is expected to close by the fourth quarter.
Besides a 29.9 percent stake in Corporate Express, investors in closely held, Marly, France-based Lyreco will get 560 million euros in cash and 340 million euros of vendor loans.
The Gaspards own 84 percent of Lyreco, said Anne Da Silva Passos, a spokeswoman for the French company, adding that no family member was immediately available to comment. Georges Gaspard, the current chairman of Lyreco, will become Corporate Express vice-chairman, and the family will get two board seats.
----------Exchange rates
Corporate Express stock slid below 4 euros in January, a four-year low, after the company lost U.S. business and revenue in the world's biggest economy was eroded by the weaker dollar. The shares then rallied after Staples made its first approach in February. Staples initially offered 7.25 euros per share, sweetening the bid to 8 euros on May 13. ``Corporate Express used its higher stock price to enable this,'' said Fernand de Boer, an analyst at Petercam in Amsterdam, who has a ``sell'' rating on the shares.
Corporate Express and Lyreco forecast 2008 combined sales of as much as 8.2 billion euros, which will rise to 9.5 billion euros to 10 billion euros in 2011. Earnings before interest, tax, depreciation and amortization as a percentage of sales will increase to 8 percent in the next three years from as much as 6.8 percent this year, the companies said.
Yesterday, Staples said revenue at U.S. and Canadian stores, its biggest division, rose 1.9 percent, with sales at stores open at least a year falling 6 percent. International revenue climbed 19 percent to $755.6 million, with more than half that gain from the dollar's drop against major currencies.
Deutsche Bank AG and JPMorgan Chase & Co. gave Corporate Express financial advice, while Allen & Overy was the legal adviser. Rothschild acted for the French company, which was founded in 1926. It became Lyreco in 1985, according to the distributor's Web site.
(Source: Bloomberg)