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On Friday, Staples announced it had agreed to acquire all the outstanding common stock shares of Essendant – an office and industrial supply distributor – at $12.80 per share in cash. The transaction, which includes Essendant’s net debt, equates to $996 million.
Part of the Larger Picture
The deal comes on the heals of Staples’ own acquisition by Sycamore Partners last year for $6.9 billion. Sycamore Partners, a private equity firm, also owns a reported 11% of Essendant.
Upending an Existing Agreement
The deal also upends talks of a merger which Essendant had been entertaining with another office supply distributor, S.P. Richards. The $12.80 per share purchase price is based off a 51% premium of Essendant’s share price from April 11, 2018, the day before Essendant announced its intentions to merge with S.P. Richards. Staples will pay a $12 million breakup fee to S.P. Richards’ parent, Genuine Parts.
In a statement regarding the sale, Essendant CEO and president Ric Phillips stated, “We believe combining with Staples provides a tremendous opportunity to enhance our resources and ability to serve customers.”
Staples’ Strategy in Buying Essendant
The move may be seen in larger part as Staples’ attempt to stem-off the rising tide of Amazon Business by moving beyond office supplies. Amazon Business, the business supply arm of Amazon, sells office supplies to hospitals, governments, and Fortune 500 companies alike. To this end, Essendant has 61 distribution centers of its own which Staples will now acquire. Essendant in its own right sells everything from janitorial supplies, to auto parts, and even oil field equipment.
Kirkland & Ellis LLP will act as legal counsel for Staples, while Barclays and Morgan Stanley serve as financial advisors. Skadden, Arps, Slate, Meagher & Flom LLp will act as legal counsel for Essendant, while Citigroup Global Markets Inc. serve as financial advisor.
The deal is expected to clear sometime in the forth quarter.