Staples Stops the Essendant’s Merger

Originally published at OPI.
Staples makes shock move for Essendant

According to OPI, the proposed merger of Essendant and SP Richards has been thrown into doubt after Staples has entered the race to acquire Essendant.

In a regulatory filing with the US Securities and Exchange Commission (SEC), it has been revealed that Staples has taken a 9.9% stake in Essendant and has made an offer to acquire the wholesaler.

We can know from the SEC filing that Staples expressed its interest in engaging with the wholesaler regarding a proposal to buy Essendant for $11.50 per share in cash, which is higher than the SP Richards’ on April 17. The two companies has a long negotiation since then.

As of 16 May, Staples – via an entity called Emu Investments – owned around 37 million, or 9.9%, of Essendant’s common stock.
It would appear that as part of their fiduciary duties, Essendant’s board of directors have had little choice but to initiate a process of engagement with Staples: the Staples offer is all cash – giving Essendant shareholders immediate liquidity – and the promise of more than $11.50 per share represents a premium over the GPC/SP Richards deal.

In a press release, Essendant confirmed that it had also received an improved offer from GPC on 7 May that could value the GPC deal at $12 per Essendant share. This proposal involves a contingent cash payment of up to $4 per share payable to Essendant shareholders once its merger with SP Richards has been completed.

What happens next is not clear. That will depend on the decision of the Essendant board of directors.

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