Essendant Inc.—a top-tier distributor that sells office and industrial products to thousands of wholesalers and resellers and also drop-ships for retailers—will become part of office supplies merchant Staples Inc. under terms of a deal valued at nearly $1 billion, the two companies announced today.

Ric Phillips,
president and CEO, Essendant

The deal, coming a year after Staples was acquired by investment firm Sycamore Partners for $6.9 billion, will result in a major new multibillion-dollar player in the business of distributing office supplies and industrial products ranging from automotive parts to equipment for oil fields. The agreement, expected to close in the fourth quarter, also upends a plan that Deerfield, Ill.-based Essendant, which reported $5 billion in 2017 revenue, had entertained since April to merge with S.P. Richards, a $2 billion office supplies distributor owned by General Parts Co.

The combination of Essendant and Staples will produce a much larger company. Before its acquisition by Sycamore, Staples reported $10.108 billion in sales at its North American Delivery unit, which is comprised of its business-to-business distribution operations including StaplesAdvantage.com and Quill.com. NAD also includes the flagship site Staples.com, which sells to small businesses and consumers.

“After carefully evaluating Staples’ revised offer, including taking into account the extended regulatory process and risks associated with the S.P. Richards transaction … we are confident that the Staples transaction is in the best interest of Essendant shareholders,” Charles Crovitz, chairman of Essendant, said in a prepared statement. Crovitz said the risks tied to the S.P. Richards merger involved “rapidly changing industry dynamics” that would could hurt its attempts to operate more efficiently, but did not elaborate.

Ric Phillips, president and CEO of Essendant, added, “We believe combining with Staples provides a tremendous opportunity to enhance our resources and ability to serve customers, while delivering compelling and certain value to shareholders.”

Staples said it would work with Essendant to “deliver significant value to independent resellers and end customers across the U.S.”

As B2BecNews reported earlier this week, Staples intends to pay $12.80 in cash per share for Essendant’s common stock, which reflects a 51% premium to Essendant’s share price on April 11, 2018, the day before Essendant announced plans to merge with S.P. Richards. Staples will pay a total of $996 million to cover the stock purchase and the assumption of Essendant’s debt.

Staples has also made other investments to build out its B2B operations, some of which complement what Essendant offers. In June, it acquired HiTouch Business Services, a network of dealers that sell office products, workspace design services and IT products and services. At the same time, Sycamore has said it plans to run the network of Staples retail stores as a separate operation.

Essendant, in addition to distributing products, provides digital commerce technology and services that help its client resellers sell through their own e-commerce sites.

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