CE declines Staples’ announced offer price

In this press release, you can read the formal refusal from the management and supervisory board of CE of the revised offer from Staples. Mr. Ventress is writing directly to Ron Sargent to express his dissatisfaction with the offer. The refusal leaves the door for negotiations wide open, and is not at all anymore about preferring a stand alone strategy, although reference is made to the strategic plan, but only to serve as a value enhancer.

I think Mr. Ventress is exaggerating a little bit with respect to his perceived value, but in his position he should. He wants a better reflection of ongoing operating value, recognition of the strategic plan, and he wants a bigger slice of the synergies. Mr. Ventress says that these synergies will be significant, and feels he gets none of them in the current offer. The question is what each party is using as a baseline and what the level of the synergies is they will be arguing about

At the moment the offer was made, CE was trading at around EUR 5.50 per share, which I am sure Mr. Ventress felt was too low. Also based on his interpretation of the Q1 results he may feel a higher stand alone value, closer to the current offer price, should be used as a baseline. Staples believes the base line value for CE should be somewhere between EUR 4.32 and EUR 5.43.

With respect to synergies, I would not be surprised if Staples sees synergy effects that could easily be valued at EUR 5.00 per share. An annual saving of about EUR 100 million after taxes would already create such a value, and this does not sound like a stretched target.

So my guess is that the negotiations will be about a synergy effect of about EUR 5.00 per share and the base line value for CE. If Mr. Ventress can make a convincing case for the justification of a higher stand alone value, and can identify the significant synergies that he himself also sees, he may be able to convince Staples to a better deal, which in that case could be friendly and swift. This must have some value for Staples.