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S.P. Richards/Essendant Merger Agreement to Terminate

Genuine Parts Co. (NYSE: GPC) said it will not make any counter proposals to Essendant in the ongoing pursuit to acquire the office products wholesale distributor.

Essendant notified GPC on September 10 that it intends to terminate its existing agreement to merge with GPC’s S.P. Richards business in favor of a superior offer from Staples, Inc. The notice triggered a three-day match period during which GPC said it will evaluate its rights under the existing merger agreement between the two companies.

Essendant and GPC entered into a definitive merger agreement on April 12, 2018, in which Essendant agreed to combine with GPC’s S.P. Richards business in a deal valued at $680 million, including a one-time cash payment to GPC of $347 million. The merged business products wholesaler would have pro forma 2017 net sales of about $7 billion and more than $200 million in adjusted EBITDA.

Staples submitted an unsolicited offer on April 17, 2018, which it reaffirmed on September 4, 2018, to acquire all of the outstanding shares of Essendant common stock for $11.50 per share in cash. Essendant said this week that Staples has proposed to buy Essendant for $12.80 a share in cash, or $482.7 million.

GPC said it will not make any counter proposals and that its existing merger agreement with Essendant will terminate at the end of the three-day match period. Upon termination of the merger agreement, Essendant will be required to pay a $12 million termination fee to GPC, the company said.

GPC released the following statement in response to Essendant’s notice this week:

“The Merger Agreement announced on April 12 was the result of a rigorous due diligence and negotiation process that we believe accurately determined fair value for the transaction combining S.P. Richards and Essendant.

“We believe that the prospects for S.P. Richards remain strong and that there is significant opportunity for S.P. Richards to grow and deepen its relationships with both independent dealers and other customer channels. As such, we are confident in our ability to drive growth and profitability for S.P. Richards and to support value creation for GPC shareholders.”

 

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