Essendant Inc. has faced rising challenges of late as it contends with lower demand in its traditional core market of office supplies. But its options for taking a new course have increased with overtures from Staples Inc. and Genuine Parts Co.
Essendant said this week that it had received an unsolicited proposal from office supplies merchant Staples Inc. to acquire all of its common stock for $11.50 per share in cash, an offer Staples made on April 17. After Essendant rejected the offer, Staples made a revised proposal on April 29, asserting it would be “able to identify incremental value opportunities” resulting in a “significantly” more valuable offer, according to a statement released by Essendant. Staples didn’t elaborate on those opportunities.
Staples asserted in an April 29 letter to Essendant CEO Ric Phillips that its offer represented a 44.5% premium over the value placed on a proposed merger of Essendant with S.P. Richards, an office supplies distribution subsidiary of Genuine Parts Co. The proposed merger—which has been approved by the boards of Essendant and GPC and is expected to close later this year pending stockholder and regulatory approvals—has been valued at about $680 million.
“We remain committed to acquiring all of the outstanding shares of Essendant common stock,” Staples said in the letter, adding: “After receiving confidential information about Essendant and in engaging in discussions with you, we believe we will be able to identify incremental value opportunities which should enable us to increase our all-cash offer significantly in excess of $11.50 per share.” Staples is a portfolio company of investment firm Sycamore Partners, which already owns 9.9% of Essendant’s stock.
On May 7, GPC countered Staples’ offer with sweetened merger terms tied to the future value of the merged company’s stock that it says could result in an additional $700 million in shareholder value. GPC says the merged company would also operate with a better assortment of products and a stronger network of dealers and resellers.
Phillips said in a May 16 letter to shareholders that the overture from Staples had not altered Essendant’s agreement with GPC to merge with S.P. Richards. He added that the Essendant board had not changed its recommendation to shareholders to vote in favor of the merger.
Essendant operates an internet platform for processing sales to other distributors and resellers, and helps many of its clients sell to their own customers through e-commerce sites.
S.P. Richards, which operates a customer portal for office products dealers at SPRdealerservices.com, would expand Essendant’s expertise in serving business customers—at a time when Essendant has said it needs to focus more on customer service to drive sales after recent revenue setbacks.
The proposed merger calls for a combined company—named Essendant and headed by Phillips—with about $7 billion in sales. Essendant reported 2017 sales of $5 billion; S.P. Richards, $2 billion.
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