Staples in $3.7 Bln Offer for Corp. Express

AMSTERDAM (Reuters) – U.S. office goods supplier Staples proposed a7.25 euros per share cash offer for Dutch peer Corporate Expresson Tuesday, valuing it at around 2.5 billion euros ($3.7 billion) and sending its shares soaring.

Analysts said the deal would bring cost synergies and boost Staples’market share in the United States where Corporate Express generatesaround 50 percent of its revenue.

Ending months of speculation about a possible bid, Staples said itsoffer represented a premium of around 67 percent to Corporate Express’closing price of February 4, and it urged the Dutch firm’s managementto co-operate.

"From a strategic point of view they are a good fit but itsignificantly undervalues the company. They will probably have to raiseto about 8 euros," said Fortis analyst Maarten Bakker.

Corporate Express, one of the world’s largest office productswholesalers, has been under pressure from hedge funds to put itself upfor sale after losses in the United States, its key market. It was notimmediately available to comment.

Its shares were up 41 percent at 7.65 euros at 9:10 a.m. ET.

Corporate Express, which installed new management towards the end oflast year, said earlier this month it had managed to reverse fallingU.S. sales in the last quarter of 2007 and reiterated it wanted tocontinue as an independent firm.

"Staples has high regard for the Corporate Express management team,and believes together our combined companies will create significantopportunities for all stakeholders," said Ron Sargent, Staples chairmanand chief executive.

In a letter to Corporate Express, Staples wrote: "Over the lastseveral months, we have made repeated attempts to engage in discussionswith you concerning a business combination, and we have beendisappointed that you have not been willing to do so.

"We believe that a business combination with Staples at this timewould result in superior benefits for Corporate Express’ stakeholders."

Corporate Express has traded at a discount to Staples, at 10 timesprojected 2008 earnings versus a price-earnings ratio of 15 for Staplesand 10 for number two Office Depot Inc.

(Reporting by Alexandra Hudson; Editing by David Cowell)