Corporate Express, Dutch company to merge

BROOMFIELD –Corporate Express, the second largest Colorado-based corporation after the acquisitions of U S West and TCI, is merging with a Dutch partner.

Corporate Express was founded in Boulder in 1986 by Jirka Rysavy. A year ago, after 12 years as chairman and chief executive officer, Rysavy passed his CEO title to company president, Bob King, in order to focus on his newest venture, Gaiam Inc.

The decision by Corporate Express Inc. (CEXP, Nasdaq) to merge with Buhrmann NV, a Dutch business-services company (BUH, Amsterdam), was motivated in part by Buhrmann’s impressive financial resources and global reach.

“I think that currently we want to take advantage of some of the situations this merger puts us in,´ said Bob King, Corporate Express president and chief executive officer.

In the short term, he noted, he thinks the company will benefit from a more efficient purchasing system, increased buying power and marketing synergies. Additionally, King believes the combined executive experience will enhance corporate strategy.

“We have two management teams who are pretty deep in terms of their knowledge in the industry,” he said.

Broomfield based office-products distributor Corporate Express announced the proposed acquisition by Buhrmann NV on July 13.

Officials from both companies described the particulars of the deal during a press conference at Corporate Express headquarters in Interlocken business park: Buhrmann will buy the company for $2.3 billion in cash, or $9.70 per outstanding share, and will assume $1.2 billion in debt. The per share price could be adjusted depending on Corporate Express’ effort to sell its Delivery Systems division.

Buhrmann is the parent company of Chicago-based BT Office Products; the North American operations of the combined company will be headquartered in Broomfield. It will be the world’s largest office supply company with dominant market positions on three continents: North America, Europe and Australia.

The deal is expected to close in the fourth fiscal quarter of 1999.

Sharing IT

King said another benefit of the merger will be sharing of information technology.

“(Buhrmann) saw an opportunity to leverage the investment we’ve made (in IT),” he observed, adding that the sharing of systems will be a two-way street.

“They’ve done some good things with their purchasing systems,” King noted.

Linda Dill, vice president of strategic planning and investor relations at Corporate Express, also noted that information systems were a big selling point.

“They really want to utilize our system technology, and we have a great team here,” she said.

Dill stated that online-ordering revenues for Corporate Express will total $150 million to $200 million for 1999, a higher figure than Buhrmann’s expected electronic gross for this fiscal year. Corporate Express’ proprietary online-ordering system, eWay, is considered among the best in the industry, Dill said.

Office-supply juggernaut

Nonetheless, the thought of an office-supply juggernaut with an enviable worldwide market share likely overshadowed high-tech issues during negotiations. Buhrmann NV’s 1998 sales of $6 billion (of which office products represented nearly one third) placed them at fifth in the United States and third in the world. The merger with Corporate Express, the second-largest contract stationer in the United States, will boost both of these rankings to first, with combined annual sales of more than $9 billion.

Rysavy’s provision added to the merger agreement that the U.S. headquarters of combined entities remain in Broomfield was appreciated not only by Corporate Express employees but also by Jim Long of Interlocken business park and Bill Berens, mayor of Broomfield.

“The presence of such a corporate entity is a boon to Broomfield,´ said Berens. “Corporate Express has always been one of our crown jewels, businesswise,” he noted.

Berens pledged Broomfield’s support to Corporate Express and Buhrmann immediately after the July 13 announcement.

King noted that there is no chance of a decline from the current head count of 450 employees at the Broomfield headquarters.

“I think we will be bringing some of the BNV office people here,” he said, adding that the net employment effect of the merger would be a “slight gain” in the number of Broomfield based workers.

Price too low

Even after succeeding with his provision that the combined entity be headquartered in Broomfield, Rysavy did not appear thrilled with the deal. “Even though this is good for my personal timing with Gaiam, I think we could do significantly better for our shareholders and employees,” Rysavy said.

To understand Rysavy’s view, one only needs to look back one year ago when he promoted Bob King to the CEO position. In a press release at that time, King commented, “I would like to thank Jirka for the opportunity to help him grow Corporate Express to a current revenue run-rate of $4.5 billion. I am pleased to assume the role of CEO and continue to implement the strategy we have established to build upon our position as the world’s largest corporate supplier.” The price of Corporate Express stock at that time was $10.56.

King, however, countered this opinion, saying that the price was fair. He noted that $9.70 per share represents a 40 percent premium over the average trading price for the past 30 days.

Some shareholders, however, disagreed with King’s view, filing suits in Arapahoe and Boulder County District Court. The shareholders claim the proposed deal provides only a 13 percent premium in stock price.

Standard & Poor’s Rating Services put out a press release July 13 stating that Corporate Express would be placed on Credit Watch with positive implications if the company’s debt is refinanced as planned. The release stated that the new company will be “highly (leveraged) compared with Buhrmann’s under-leveraged position before the acquisition.”

Business Report correspondent Eric Peterson contributed to this story.

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