U.S. office supply retailer Staples left the price of its offer for Corporate Express unchanged on Tuesday and said it plans to launch a hostile bid.
Netherlands-based Corporate Express, in turn, again rejected the unsolicited 2.5 billion euro ($3.7 billion) offer, saying the price "significantly undervalued" the company. The proposal is not in the best interests of its shareholders and other stakeholders, Corporate Express said.
Staples said it was disappointed that Corporate Express would not negotiate, adding it planned to submit a request for approval of its planned offer to the appropriate Netherlands authority before May 13.
"But in the meantime, we continue to hope to move this along in a consensual way with Corporate Express and its management team," said Staples spokesman Paul Capelli. "We continue to invite them to sit down with us."
Staples confirmed its intention to make a public offer for all the outstanding ordinary shares and American Depositary Shares issued by Corporate Express for a price of 7.25 euros per share. Staples will also make a public offer for the depositary receipts of preference shares A and convertible bonds, the company said.
Staples said its offer represents a premium of 33 percent to Corporate Express' closing share price on Feb. 18, the day before it initially made the bid. Since then, financing plans for the deal have progressed, the retailer said, with a bridge loan commitment from Lehman Brothers now shared equally by Bank of America and HSBC Bank.
The acquisition would allow Staples to cut costs, increase its global footprint and expand in the U.S., a fragmented market where Corporate Express generates about half its sales.
As business products supplier Corporate Express has no retail operations, a combination with Staples might face few regulatory hurdles, and with the health of the U.S. economy and U.S. white-collar jobs growth in doubt, an acquisition could allow both to benefit, as both have seen their share prices slump.
On Monday, Dutch brokerage Petercam recommended that investors sell Corporate Express shares, due to the risk that Staples could withdraw its takeover offer. In the current climate, Petercam analysts wrote, that could lead to a sharp drop in Corporate Express' share price.
Corporate Express is the latest in a series of Dutch companies to attract takeover bids, some after pressure from activist investors. Few government barriers to takeovers and a liberal Dutch corporate governance code have made them desirable targets.
Shares of Corporate Express had been trading below the offer price on speculation that Staples might withdraw its bid.
Analysts at Dutch brokerage Petercam said if the deal did not go ahead, Corporate Express' shares would likely drop sharply, given the current market turmoil.
Initially, there had been hopes for a sweetened offer to secure the acquisition.