Essendant shareholders to vote in October

A special meeting of Essendant’s shareholders will take place on 5 October 2018 to vote on the issuance of new shares needed for its proposed merger with SP Richards (SPR).

In yesterday’s article on the signing of a confidentiality agreement between Staples and Essendant, we stated that Essendant’s shareholders cannot vote on the SPR transaction until the US Federal Trade Commission (FTC) has completed its antitrust investigation. In fact, this assumption was not correct, and shareholders are now being notified of a special meeting that will take place on 5 October following the finalisation of Essendant’s S-4 form that has been filed with the US Securities and Exchange Commission (SEC).

In a letter to staff, Essendant CEO Ric Phillips said that he expected this vote to occur before the FTC has completed its review.

“At the same time, we are working with the FTC to comply with their information request regarding the merger with SP Richards, and we continue to plan for the transaction to close by the end of the year,” added Phillips.

He also provided a few comments on Staples’ approach to acquire Essendant.

“As most of you are aware, Staples has made an unsolicited offer to acquire Essendant, which was reiterated in a letter issued in a public filing by Staples last week. Our board has a fiduciary duty to our shareholders to evaluate proposals like the one we received from Staples, and on 3 August we entered into a confidentiality agreement with Staples which enables us to begin discussions.

“However, it’s important to note that the SP Richards merger agreement remains in effect, and the board has not changed its recommendation that Essendant’s shareholders vote in favour of that transaction.”

Phillips also thanked staff for all their hard work and in being able to create “solid momentum” in Essendant’s second quarter results that were reported at the end of July. “We are positioning ourselves for even better results in this challenging environment [… and] our proposed combination with SP Richards will further accelerate Essendant’s progress on our strategic initiatives,” he stated.

The Essendant CEO said he would provide further updates “as appropriate”, but that these would be determined by factors such as disclosure rules.

The terms of Essendant’s agreement with Genuine Parts means that its (Essendant’s) board has little choice but to ‘toe the line’ when it comes to recommending the merger with SP Richards despite Staples continuing to turn up the heat.

Following confirmation that Staples has signed the confidentiality agreement that enables it to engage with Essendant, it has also been revealed that Staples now has all the financing in place to complete its transaction.

In a regulatory filing to the SEC dated 8 August, Staples confirmed that it had received commitment for both an asset-based credit (ABL) facility of $1 billion and a loan facility for $75 million. It said these funds, along with available cash of $240 million and undrawn borrowing capacity of $728 million on an existing ABL facility, would allow it to acquire Essendant and refinance the wholesaler’s existing debt.

Staples added that it intended to consummate the Essendant transaction with a newly-formed subsidiary under its various debt agreements or with a newly-formed ‘sister’ company to Staples.

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