Staples has won a bidding war for workplace products distributor Essendant with a sweetened offer, positioning itself to move further into business-to-business services amid the decline of its retail operation.
Essendant on Friday announced a definitive agreement to be acquired by Staples in a deal worth $487 million, or $12.80 per share, in cash. Essendant’s board had determined earlier this week that Staples’ offer was superior to Genuine Parts’ rival proposal to spin off its S.P. Richards wholesale distribution business and merge it with Essendant.
Staples has agreed to pay Genuine Parts a $12 million breakup fee.
“We are excited about the opportunity to move forward with this agreement, and to work with the Essendant team to complete the partnership of these two great companies, which will ultimately deliver significant value to independent resellers and end customers across the U.S.,” Staples said in a news release.
Essendant had agreed in April to Genuine Parts’ proposal. Staples made an initial $11.50-per-share offer but Genuine Parts countered with a $12-per-share bid, contingent on Essendant’s stock price.
Genuine Parts said this week it would not make a counter-offer to Staples’ sweetened proposal.
“After carefully evaluating Staples’ revised offer … we are confident that the Staples transaction is in the best interest of Essendant shareholders,” Charles Crovitz, chairman of Essendant, said Friday. “While our agreement to merge with S.P. Richards presented an attractive opportunity, we believe the Staples transaction provides superior and immediate value to our shareholders.”
Staples’ owner Sycamore Partners already owns about 11% of Essendant, which distributes workplace items including office products, office furniture, janitorial supplies and automotive equipment.
According to CNBC, Sycamore has been seeking to “push Staples further into business-to-business services and away from its challenged retail business.” The private equity firm acquired Staples for $6.9 billion in June 2017, structuring the deal so it could eventually wind down Staples’ retail operations.
The purchase price for Essendant represents a 51% premium to the undisturbed share price on April 11. In trading Friday, the stock rose 1.7% to $12.82.