Two days ago, I wrote a post in which I explained why I believed the share price of CE was trading above EUR 10.00 per share. Today the closing price of CE was an astonishing EUR 10.74 with less than 100k shares traded. At 17:30 Amsterdam time, Staples was trading at $ 23.98, with a EUR/USD exchange rate of 1.57. With the 1.42 conversion factor I estimated in my previous post this would give a fair value of the CE share price of EUR 10.76. With the actual and calculated price so close, it seems plausible the CE share price is now a function of the Staples share price and EUR/USD exchange rate. Staples also today announced the settlement of the post acceptance period. (end of post)
Read more...woensdag 23 juli 2008
maandag 21 juli 2008
CE trading above EUR 10,00 per share !
Although the reason for the existence of this blog is rapidly coming to an end, I have to admit CE is still keeping things interesting. After the end of the post acceptance period Staples informed us that they now have about 99.3% of the issued ordinary shares of CE. This means that about 1.3 million shares have not been tendered, and these are the shares that are still being traded now. So why are these shares trading above EUR 10.00 per share?
My theory is that with the end of the post acceptance period, Staples will start a process through which they will acquire the remaining shares of CE, either through a squeeze out, or through a legal merger. Since Staples has acquired more than 95% of the shares, the squeeze out procedure seems to be the logical choice. The price that Staples needs to pay in the case of a squeeze out procedure, will be determined by the corporate division of the Amsterdam court. Since there is no obligation anymore to pay cash for the remaining CE shares, I believe it is possible that there will be a conversion of CE shares for Staples shares.
The conversion factor will need to be fair, and I believe that this conversion factor will be established with the Staples share price at the end of the post acceptance period. On July 16th, when the post-acceptance period ended, the share price of Staples opened with a share price of $ 20.65 and closed at $ 21.18. Using the average of these two prices, and an exchange rate of about 1.5870, the Euro equivalent of a Staples share would be EUR 13.18 at that date. With these assumptions, a fair conversion factor would be 1.42 shares of CE for each share of Staples.
At the close of European trading today, Staples was trading at $ 22.26, while the EUR/USD exchange rate was 1.5875. According to the theory explained above, this would give a value of a CE share of EUR 9.87, while the closing price of CE was EUR 10.03.
In case current shareholders will not receive cash anymore, but Staples shares, it seems logical that CE shares are now fluctuating with the Staples share price. I am not sure however if this will be the case, but it would explain to some extent the current increase in the share price of CE.
It is still strange to me that the price seems to go beyond a reasonably calculated price, based on the Staples share price. In the post acceptance period I was already surprised about the fact that the CE shares sometimes traded well above the final offer price of EUR 9.25. Probably some market participants have better information than I have, about the final outcome for the last few CE shares.
woensdag 9 juli 2008
Staples Settles Its Offer for All Outstanding Securities of CE
In this news release Staples is confirming that the offer for the outstanding securities has been settled. Investors who have not yet tendered their securities can still do so until July 16th. It was very interesting to observe that the ordinary shares have been trading recently for prices well above the offer price of EUR 9.25, which seems quite strange. I can only think of a last minute short squeeze, but admittedly, this is not a very satisfactory explanation.
We also learn that it is expected that the last day of trading of ADS's on the NYSE will be on or about July 18, and the last day of trading of the ordinary shares and preference A shares on Euronext will be on August 6. (end of post)
dinsdag 8 juli 2008
Moody's downgrades Staples unsecured debt
It seems there is another price to be paid by Staples for the acquisition of CE. We can read here that Moody's has downgraded the senior unsecured rating of Staples debt to Baa2 from Baa1, citing the "sharp rise in leverage that results from Staples' fully priced acquisition of Corporate Express." It is pretty obvious that, given the problems in international financial markets, shareholders of CE got a really good deal with the acquisition by Staples. In this challenging environment, the sooner Staples demonstrates the benefits and synergies from the acquisition for their shareholders, the better it will be. (end of post)
Read more...donderdag 3 juli 2008
Contract CFO of CE changed
CE issued this short press release, stating that the offer from Staples is now unconditional. More interestingly, the same release also stated that an agreement has been reached with Mr. Floris Waller, CFO of CE, whereby his contract of employment for an indefinite period of time will be modified and continued initially for a period of 6 months. It seems logical that the services of Mr. Waller will not be required much longer, when CE becomes integrated in Staples, instead of being an independent listed company. Given the events of the last 5 months, I find it hard to imagine that there is a warm relationship between Mr. Sargent and Mr. Ventress, the CEO of CE, and I would not be surprised if the career of Mr. Ventress in Staples will not last very long either. (end of post)
Read more...woensdag 2 juli 2008
Staples Declares the Offer for all Outstanding Securities Unconditional
As expected, Staples today declared the offer for all outstanding securities unconditional, and shareholders can expect payment by July 9th for their tendered securities. Staples also decided to provide for a post-acceptance period until July 16th, with settlement on July 23rd (which is effectively after 5 business days). Since this proposition is as close as it will get to a riskless investment, investors with cash available could consider buying shares and tendering them immediately. Assuming a price of EUR 9.17, which was the close of today in Amsterdam, return would be almost 0.9% for a holding period of only 3 weeks, which is about 16% annualized. Compared to the 1-month EURIBOR rate of about 4.4%, this is not bad at all. (end of post)
Read more...zondag 29 juni 2008
Staples' Tender Offer Receives Overwhelming Acceptance from CE Shareholders
In this news release from Staples we can read that at the end of the acceptance period the following was tendered (or already with Staples): 95.2% of ordinary shares, 99.7% of preference shares A and 99.1% of convertible bonds. On or before July 2nd, Staples will announce whether the remaining conditions to the offer have been satisfied and whether the offer will be declared unconditional, which obviously is very likely with these high percentages.
Since the minimum level of 95% for a squeeze-out procedure was reached, it is not so obvious if a post acceptance period will take place, since this will take additional time, and will most likely not prevent the necessity for a squeeze-out procedure. If Staples declares the offer unconditional without a post acceptance period, chances are that the share price will drop further from the closing level of EUR 9.17 last Friday.
It is however very likely that the share price in the squeeze-out procedure will be equal to the offer price of EUR 9.25, since the rights of minority shareholders in these situations are fairly well protected, and the offer price will be deemed to be a fair price. Since the procedure will maybe take up to 3 months, it would be normal if the share price of CE will continue to trade at a discount to the offer price, which may give some opportunities to last minute speculators.
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