Staples’s $996 Million Acquisition of Essendant

Barclays and Morgan Stanley & Co. LLC are acting as financial advisors and Kirkland & Ellis LLP is acting legal counsel to Staples. Citigroup Global Markets Inc. is acting as financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal counsel to Essendant.

Staples, Inc. and Essendant Inc. (NASDAQ: ESND) have entered into a definitive agreement under which an affiliate of Staples, the world’s largest office solutions provider, will acquire all of the outstanding shares of Essendant common stock for $12.80 per share in cash, or a transaction value of $996 million including net debt.

The transaction follows the determination by Essendant’s Board of Directors, after consultation with Essendant’s legal and financial advisors, that the Staples proposal constituted a “Superior Proposal” as defined in Essendant’s previously announced merger agreement to combine with Genuine Parts Company’s (NYSE: GPC) (“GPC”) S.P. Richards business (the “S.P. Richards agreement”). Consistent with that determination, and following the expiration of the three-day waiting period during which GPC did not propose any amendments to the S.P. Richards agreement, Essendant terminated that agreement. In connection with the termination, GPC is entitled to a $12 million break-up fee, which Staples is paying as part of its agreement with Essendant.

The $12.80 per share purchase price reflects a 51% premium to Essendant’s share price on April 11, 2018, the day before the company announced plans to merge with GPC’s S.P. Richards business, and a 10.3x multiple of last-twelve-months Adjusted EBITDA.

The transaction will be implemented through a cash tender offer at $12.80 per share. The transaction is conditioned upon, among other things, the number of Essendant shares included in the tender offer, together with the 11.15% of Essendant’s outstanding common shares currently owned by Staples and its affiliates, representing more than 50% of Essendant’s outstanding common shares, expiration of all applicable waiting periods under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976, and other customary closing conditions. If the tender offer is consummated, the tender offer will be followed by a merger in which any shares of Essendant common stock not purchased in the offer will be converted into the right to receive the same $12.80 per share in cash. The transaction is not subject to a financing condition and is expected to close in the fourth quarter.

Kirkland advised Staples with a team including corporate partners Sean Rodgers (Picture), Laura Sullivan and Patrick Jacobs with support from corporate partners Mike Shoaib and Shaun Mathew. Financing partner Jud Oswald and tax partners Roger Lucas and Jeffery Ekeberg also played lead roles on the deal.

Skadden, Arps, Slate, Meagher & Flom advised Essendant with a team including Richard C. Witzel, Jr. and Charles W. Mulaney, Jr.

Involved fees earner: Sean Rodgers – Kirkland & Ellis; Laura Sullivan – Kirkland & Ellis; Patrick Jacobs – Kirkland & Ellis; Mikaal Shoaib – Kirkland & Ellis; Shaun Mathew – Kirkland & Ellis; Judson Oswald – Kirkland & Ellis; Roger Lucas – Kirkland & Ellis; Jeffrey Ekeberg – Kirkland & Ellis; Charles Mulaney – Skadden Arps Slate Meager & Flom; Richard Witzel Jr. – Skadden Arps Slate Meager & Flom;

Law Firms: Kirkland & Ellis; Skadden Arps Slate Meager & Flom;

Clients: Staples; Essendant Inc;

Author: Ambrogio Visconti