Corporate Express Denies Buyout Talks with Staples

Dutch office supplies firm Corporate Express said Tuesday it was not in talks to be bought by U.S. rival Staples, denying a newspaper report and halving a sharp rise in its shares.

"Such discussions are not taking place," it said in a statement after noting "rumors in a Dutch morning paper regarding ongoing discussions between Corporate Express and Staples."

Dutch newspaper De Telegraaf quoted an unnamed Staples source saying that talks were at an early stage. Representatives for Staples in Europe were not available for comment.

Corporate Express, one of the world's largest office products wholesalers and formerly known as Buhrmann, has come under pressure from hedge funds to sell itself, but after a strategic review last year decided to remain a stand-alone company.

It generates around half of its revenue in the United States and has seen pressure on margins rise and its market share shrink.

"The strategy remains as communicated and we will give details about the implementation on Thursday," said a Corporate Express spokeswoman, referring to the Dutch company's scheduled earnings announcement later this week.

In volatile trade, Corporate Express shares rose as much as 46 percent to a two-month high of 6.32 after the newspaper report, but had fallen back to 4.80 euros.

At that price, Corporate Express had a market capitalization of 874 million euros ($1.3 billion) while Staples has a market value of $16.9 billion, according to Reuters data.

Corporate Express is trading at a discount to Staples, at 10 times projected 2008 earnings versus a price-earnings ratio of 15 for Staples and 10 for number two U.S. rival Office Depot .

Pressured to Sell

The Telegraaf reported that a spokesman for Staples said the retailer was looking at opportunities that could increase the company's profitability but declined to comment on possible discussions with Corporate Express.

Analysts said Staples could benefit from buying Corporate Express and a bid price could be as high as 11 euros per share.

Its shares traded at the 11-euro-level last summer, giving the company a market capitalization of 2 billion euros.

"(Hedge fund) Centaurus has been reported as showing interest at around 9.5 euro which in our view would make a bid successful within that range," ING analyst Marc Zwartsenburg said in a note.

Shares in Corporate Express have lost about two-thirds of their value in the past year, compared with a 10.7 percent decline of the Amsterdam blue chip index as the company has been hit by falling sales in the U.S. market.

Rivals such as Office Depot and Newell Rubbermaid have warned of weak economic conditions in the United States as credit problems in the housing market could affect spending.

Sources close to Centaurus Capital and a U.S. hedge fund told Reuters last September that Corporate Express should seek a buyer to unlock value.

A Centaurus spokesman declined to comment. The paper said some activist shareholders at Corporate Express were pleased about the possible sale of the company.

The company last month moved forward its annual results due on Thursday from Feb. 22 without an explanation.

Sales in the fourth quarter are expected to have fallen 13 percent and net profit is seen halved to 20 million euros, excluding a gain on the sale of a software unit, according to the average forecasts of 8 analysts polled by Reuters last week.