Office Depot may always be the one that got away. But Staples is back in buying mode.
Witness the chase taking place for Essendant Inc., the Illinois-based office supplier. Staples director Stefan Kaluzny increased the pressure this week on Essendant CEO Richard Phillips to do a deal. Phillips already has a competing offer on the table, to merge with Genuine Parts Co.’s S.P. Richards business.
Kaluzny wants Phillips to shove that offer aside. In his Aug. 13 letter to Phillips, Kaluzny pointed to Essendant’s ascendant stock price: It’s trading at nearly $15 a share, up from below $10 a share in April. Kaluzny said the stock is so hot because Staples began investing in Essendant in May, soon after the Genuine Parts merger announcement. Essendant investors clearly anticipate a deal, one that will in all likelihood be worth more than Kaluzny’s opening gambit of $11.50. (Staples also recently dangled the potential of a significantly increased offer to Essendant.)
For now, Essendant’s management is sticking with the proverbial bird in the hand. The company’s public response to Kaluzny’s letter this week praised the virtues of the Essendant and S.P. Richards merger. The Oct. 5 shareholder vote to approve that deal, Essendant said, is still on. Essendant acknowledged that Staples had agreed to enter into confidential talks, but said Staples has not yet presented a full formal offer to the board for action.
Regardless of how this turns out, Framingham-based Staples is clearly on the hunt again. Former CEO Ron Sargent’s bid for Office Depot would have been a game-changer. But a federal judge’s antitrust ruling nixed that acquisition in 2016. And its failure eventually opened the door for Kaluzny’s private equity firm Sycamore Partners to acquire Staples in a deal valued at nearly $7 billion last year, and to put new CEO Sandy Douglas in charge.
Essendant, with roughly $5 billion in annual revenue and 6,400 employees, represents a smaller prize than Office Depot. But it would still be a substantial one. Staples’ pursuit shows that the country’s largest office supplier is still hungry to get bigger.