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Genuine Parts remains committed to Essendant deal despite rival bid

Atlanta-based Genuine Parts Co. said it expects its definitive merger agreement to acquire office supplies distributor ESSENDANT INC will proceed despite a competing offer from the owner of Staples Inc.

Sycamore Partners, which owns Staples and holds a 9.9% stake in Essendant, bid $11.50 in cash for the company, an offer Genuine Parts said falls short of its own. Sycamore's interest in and offer for Essendant were disclosed in a May 16 filing with the U.S. Securities and Exchange Commission.

Under the agreement between Genuine Parts and Essendant, which was signed April 12, Genuine Parts would combine its S.P. Richards office supplies business with Essendant. Geniune Parts shareholders would own 51% of the new company and Essendant investors would own 49%. On May 7, Genuine Parts sweetened its proposal with a contingent value right that could provide Essendant shareholders with up to $4.00 per share in cash.

"We do not believe Staples' conditional, non-binding proposal to acquire Essendant for $11.50 per share in cash to be a superior proposal nor reasonably likely to lead to a superior proposal as defined under the terms of the Merger Agreement," Genuine Parts said in a statement. "Indeed, given the proposed enhanced terms and the expected financial benefits of more than $75 million in annual run-rate cost synergies and more than $100 million in working capital improvements, we are confident that the merger between S.P. Richards and Essendant delivers superior value to Essendant's shareholders."

In a regulatory filing May 16, Essendant CEO Ric Phillips said the deal with Genuine Parts remains in place and that "the Board has not changed its recommendation that Essendant's stockholders vote in favor of that transaction."

J.P. Morgan is acting as financial adviser and Davis Polk & Wardwell LLP is legal counsel to Genuine Parts.