2008: Review of the year
2008 may have been a challenging year in many ways, but it was certainly not a dull one for the OP industry, with the sector’s biggest ever takeover, contract controversy in the US and more than its fair share of M&A activity. Here are the year’s highlights…
Clement weather greets the 60,000 or so visitors who attend the yearly Paperworld bash in Frankfurt. Nearly 500 OP professionals cram into the Messe Frankfurt Congress Centre for the annual OPI European Office Products Awards and, during a memorable evening, Ron Sargent (below) delivers a superb industry toast and OPI CEO Steve Hilleard vows never to hire another German comedian.
Counterfeiting is high on the agenda at Paperworld with German customs filing 100 seizure documents and seizing almost 3,000 articles.
Europe sees some early year M&A activity as Avery acquires the home and office brands of May+Spies, German PP files manufacturer Plastoreg is taken over by Malaysia-based Asia File and UK dealer OyezStraker grows with the addition of Trendex.
The year’s big story begins to unfold as Corporate Express shares soar on press reports – which are swiftly denied – that the B2B supplier is in takeover talks with Staples. Staples goes public on the 19th declaring its intention to proceed with a 17.25 per share bid that values CE at $2.5 billion, a figure that "significantly undervalues" the company according to CE which reiterates its intention to pursue its stand-alone strategy.
In what turns out to be the first in a series of PR disasters for Office Depot’s Business Solutions Division (BSD), the state of Georgia terminates the company’s $60 million statewide contract.
Staying in the US, the writing is on the wall for regional wholesalers’ alliance AMW after O Henry is acquired by SP Richards.
Things don’t get any easier for under-fire Office Depot CEO Steve Odland as he faces a dissident shareholder revolt from activist shareholder Alan Levan. Levan nominates former Depot COO Mark Begelman and ex-Staples COO Marty Hanaka to replace Odland and David Fuente on the company’s board at the annual shareholders meeting. The nominations spark a war of words between the two.
There’s a stand-off in the Staples-Corporate Express saga-to-be as the US giant confirms its plans to proceed with its 17.25 offer and CE refuses to be drawn into negotiations. One analyst describes Staples’ price as "a joke" and the consensus is that it will have to come back with a better offer to tempt CE to the negotiating table.
Following the demise of SHOPA earlier in the year, former SBTS Managing Director Carm Crawford sets up the School and Office Products Network to fill the research and information void.
The month begins with the opening of a new office superstore chain in Australia, Ofis.
Another first in April is the return of a national OP trade show in the UK. SOPX is well received by the industry and plans are immediately made for a 2009 edition.
Office Depot finally announces its entry into the Indian market and back home, Steve Odland survives the challenge of Alan Levan as institutional shareholders side with the incumbent CEO, but the BSD is once again in the headlines for the wrong reasons as the San José Mercury News digs the dirt on the California state office supplies contract and the Nebraska state auditor slams Depot for "serious pricing errors and overcharges". It doesn’t get any better as the company’s quarterly results see profits down by 55 percent while same-store sales post a near 10 percent drop.
If April was quiet, May is a rollercoaster month of almost epic proportions. After CE confirms its ambitious growth targets and stand-alone strategy, Staples comes in with an improved 18 per share offer that is swiftly rejected by CE’s management board. On 19 May, Staples complains of the "unwillingness" of CE’s management to negotiate and launches a hostile bid directly to shareholders. CE’s riposte less than 48 hours later takes everyone by surprise as Peter Ventress and Eric Bigeard (below) hold a joint press conference to announce the 11.7 billion merger of Corporate Express and Lyreco. Gripping stuff!
Office Depot leaps to the number one spot in Thailand after buying out main rival Makro Office Centre for around $10 million and Staples opens its first branded store in South America.
Over 200 delegates from nearly 30 countries meet in Rome for what is widely regarded as a varied, thought-provoking and inspiring OPI Europe.
The Staples-CE takeover hurtles to its conclusion as the American company, reeling from the Lyreco move, hits back with a higher-than-expected 19.15 per share offer that receives the backing of a sizeable chunk of CE shareholders. Eric Bigeard puts on a brave face but it soon becomes clear that the Lyreco deal won’t get the required shareholder support and CE management eventually accepts a final 19.25 offer. A job well done for Peter Ventress in his quest to increase shareholder value and Lyreco walks away with 130 million for its troubles.
On the UK wholesaler scene, Kingfield Heath/ISA Wholesale is re-christened VOW and Spicers underlines its growing EOS credentials by being named as an HP Premier Distributor.
Competition in the US hots up as Wal-Mart-owned Sam’s Club trials its first Business Centre and Amazon debuts its Office Supplies store.
Office Depot and OfficeMax post disappointing quarterly results with both delivery and retail sales down sharply. Depot’s Mexican joint venture partner Gigante sees an opportunity and puts in a $430 million bid to buy out Depot’s 50 percent stake but the offer is rejected.
The scramble for customer dollars during the key back-to-school season sees office suppliers going head to head with discount stores by underlining their value proposition. Previous campaigns had focused on breadth and quality of products. It is ultimately a strategy that fails make a great difference.
The future of wholesaler ActionEmco comes under the spotlight as SP Richards acquires another member of the AMW alliance, this time west coast wholesaler PPI. Meanwhile, highly-respected independent dealer Dave Guernsey (right) forms Pinnacle Affiliates, a new buying group aimed at large dealers. The UK loses an iconic name in stationery as John Dickinson is rebranded as Hamelin Paperbrands. A crumb of comfort for Office Depot as the state of Georgia rescinds its debarment ruling. Meanwhile, Staples’ acquisition of CE goes through without a hitch.
Fears for the future of ActionEmco prove to be founded as the wholesaler is broken up – SP Richards completes its third recent acquisition by snapping up the Midwest operations, while United Stationers acquires its east coast business. Buying group is.group is quick to reassure the OP community that its private label Legacy brand, launched with ActionEmco in 2007, will not be affected.
The state of California decides to put its $28 million-per-year office supplies contract out for rebid. Office Depot agrees to refund the state $2.5 million and an additional $56,000 in overcharges. But Depot’s struggling BDS is boosted when it is wins the rebid Nebraska contract
Staples shows that it is not immune to the economic downturn after announcing lower than expected preliminary second quarter results – while still outperforming its rivals.
The former Kingfield Heath business, Vasanta Group, combines its VOW and ISA Retail operations. Retail Managing Director Ian Sinclair takes the helm with former VOW Managing Director Andy Spence leaving.
Speaking during Staples’ quarterly conference call, Ron Sargent optimistically suggests that the economic downturn has bottomed out and he expects to see an improvement by the end of the year. Two weeks later Lehman Brothers collapses and the ensuing financial meltdown sends stock markets plummeting and major economies teetering on the brink of recession… we later learn that the US had already been in recession since the end of 2007. Fears about OfficeMax’s exposure to the Lehman collapse see its shares fall by up to 30 percent in a single session.
In a surprise announcement, we learn that Staples’ new President of European Contract, Peter Damman, has left the company.
It’s a busy month for M&A activity. Smead Europe executives Reiner Eckhardt and Hans Eisink (left) announce an MBO and the resurrection of the Atlanta brand. Systemcare is acquired by $16 billion dollar US industrial group ITW. Compatibles supplier Katun is acquired by private equity fund Monomoy Capital Partners and ambitious Italian stationery and art products manufacturer Fila buys German pencil maker Lyra.
With the global economy sounding the red alert and stock markets around the world in freefall, this is a tough month for OP companies. FedEx Office says that it will cut 650 jobs globally, pulling out of loss-making markets. Office Depot, Escalade and Newell all report lower sales while MWV and Avery reduce their outlooks.
In the first major CEO casualty of the year in the OP sector, ACCO’s David Campbell is shown the door, replaced by Bob Keller who immediately announces a major organisational change with the creation of ACCO Americas and ACCO International.
Lyreco and OfficeMax announce a global contracts alliance, signalling an end to ‘Max’s arrangement with EOSA. Rumours that this could lead to a full-blown acquisition of ‘Max by the French contract stationer are swiftly denied by Eric Bigeard. is.group’s CEO Mike Gentile (above) is elected as the new Chairman of BPGI. TriMega President Charlie Cleary tells the dealer group’s members at its 2008 conference that the US independent dealer community has a chance of grabbing an estimated $2 billion of business resulting from Staples’ acquisition of Corporate Express.
There are major retail casualties on both sides of the Atlantic with Circuit City and Woolworths going into administration and putting almost 70,000 jobs at risk.
The industry will be two ‘Bobs’ fewer next year with veterans Bob Campagno from Fellowes and ACCO’s Bob Jones announcing their well-earned retirements.
Corporate Express Australia begins its search for a new CEO after the surprise announcement that Grant Harrod (left) will leave the company next March after more than six years in charge.
Despite the credit crunch, seven of the management team at French compatibles manufacturer Armor led by CEO Hubert de Boisredon strike a deal for an LBO of the company with private investment firm Orfite.
As OPI goes to press in December we have seen some more depressing news on the jobs front. MWV and Staples have said that they are making cuts, ACCO has announced that it will temporary shut down its US production sites at the beginning of January, Spicers is looking to reduce costs in its UK distribution network and UK stationery and toy distributor Magson has filed for administration, making most of its 200 staff redundant.
Things look like getting tougher before they get better, but you’re a resilient lot and no doubt the OP sector will emerge from the current crisis leaner and stronger.
Whatever 2009 has in store for this industry, it is likely to be just as exciting and news-packed as the outgoing year.