Staples has acquired Essendant, a national wholesale distributor of office supplies, for $996 million, including net debt.
The deal, coming a year after Staples was acquired by investment firm Sycamore Partners for $6.9 billion, will result in a major new multibillion-dollar player in the business of distributing office supplies and industrial products that range from automotive parts to equipment for oil fields. With Essendant under its wing, Staples now has a stronger position within the B2B sales space, giving the retailer a differentiation point it had struggled to create.
Before its acquisition by Sycamore in September 2017, Staples reported $10.1 billion in annual sales at its North American Delivery unit, which is comprised of B2B operations including StaplesAdvantage.com and Quill.com, as well as the Staples.com site. Essendant gives Staples an extra $5 billion in annual sales, as well as a network of distribution centers that will enables the company to ship most products overnight to more than 90% of the U.S.
Staples also has made other investments to build out its B2B operations, some of which complement what Essendant offers. In June, the retailer acquired HiTouch Business Services, a network of dealers that sell office products, workspace design services and IT products and services.
The company has seen growing competition from rival Office Depot and Amazon Business, the e-Commerce giant’s B2B sales marketplace. In 2017, Office Depot acquired CompuCom, an IT and business services provider, for approximately $1 billion. After revealing plans to open CompuCom’s Tech-Zone help desks in its stores to assist entrepreneurs and SMB owners, Office Depot expanded these services even further with the Workonomy platform.
For its part, Amazon Business is on track to post global sales of more than $10 billion over 12 months, showing that the e-Commerce giant continues to be a force in every sales channel.
When Staples attempted to merge with Office Depot in 2015, the retailer actually sought to sell off more than $550 million in corporate contract business to Essendant. Despite these efforts to slim down, the Federal Trade Commission still blocked what would have been a $6.3 billion merger.
An affiliate of Staples will officially acquire Essendant for $12.80 per share, a 51% premium to Essendant’s share price on April 11, 2018. The deal is expected to close in Q4 2018.
The move follows Essendant’s previous rejection of a lower Staples offer and the termination of an acquisition proposal by Genuine Parts Company. Staples will pay a $12 million break-up fee to Genuine Parts as part of its agreement with Essendant.