The future for Corporate Express

Corporate Express (CE) chiefs have admitted for the first time they were in "regular contact" with their counterparts at Office Depot and Staples throughout their recent turbulent strategic review.
The news emerged during a behind-closed-doors briefing for analysts last month following the publication of CE’s eagerly awaited five-month internal strategic review.
 
Strategists from global consultancy McKinsey and financiers from Deutsche Bank and JP Morgan worked alongside CE in reviewing the future for the group, which according to chairman Paul van den Hoek, "included merger, a sale of the company, a combination with another company, and a split-up".
 
The outcome came as little surprise as the board decided on remaining as a standalone company, with CEO Frans Koffrie offered as the sacrificial scalp to appease shareholders.
Koffrie’s departure was buried deep down the company’s official press release, although analysts at the briefing were told he had to go because he was not the "execution-driven sort of manager" they now needed.
 
Chairman van den Hoek explained how the decision was reached to remain as a standalone and not enter official takeover talks with the US-based big players. He said: "We feel that we are very well positioned to go forward as a standalone company. We have a very good market position in all the relevant areas. We have a very good infrastructure and we have very good people. But we require a remedy and these are very important things. These basically have to do with execution, execution, execution.
 
"We have approached the future of the company with an open mind and without any bias. And with our advisors, who, of course, take the same position by definition, we have reviewed each and any option and we have come unanimously with them to the conclusion that this standalone option, at this point in time, is the best way forward.
 
"I’m not going to share the details of this review because I would have to disclose very sensitive information that I just cannot share. So, you have to accept our unanimous conclusion."
 
Following publication of the strategic review at the beginning of October, a raft of strategic initiatives and organisational changes were announced, which are intended to transform the company into a more "operationally focused and sales-driven" organisation.
 
Koffrie’s replacement, Peter Ventress, provided his vision on how he was going to engineer the turn-around of CE… and even offered a hint at a foray into the direct marketing arena.
He told the group of industry analysts: "This isn’t an overnight fix. This is about transforming and changing a company. This is about changing the way we do things. This is about changing a culture, if you like. That will take place over the next weeks, months and years. But we’re clear about where we’re going.
 
"We have a clear strategic focus. We have the organisation, created, developed and being put in place right now, to execute on those strategic priorities and we know what we have to deliver. And we’re confident that the delivery of those will come through the transformation."
 
Ventress said he did not want to talk about what had gone wrong in the past, but wanted to concentrate on the future and "the focus, the emphasis is on execution. And to be harder nosed about our performance".
 
And he hinted strongly that CE might start looking at a direct marketing division in the near future.
 
He said: "Direct marketing represents an opportunity for us, I think, in the future and for all B2B players. One has to have the opportunity to be able to develop that business. But we will keep that firmly under review and it’s clearly attractive to parts of the business."
 
Ventress did successfully dodge a question about his revised remuneration package, simply saying it would be published within the next annual report, released next year, and added: "I will fully expect that my remuneration will be tied to performance as it will for everybody else in the company."
 
When quizzed on how Corporate Express could afford to fund future acquisitions in target countries such as Spain with its current debt position, a flagging credit rating and apathetic shareholders, Ventress said: "We certainly see that there will be opportunities to acquire businesses going forward. Likely in order to build those positions in those countries that I have referred to there will be relatively small acquisitions. We would fund them from our ongoing activities.
 
"Were there ever an opportunity or an occasion where something more substantial was in the frame, clearly one would have to look at different options. But we don’t see it as a problem today that we would be prevented from continuing to focus on developing a concentrated office products global business."
 
And about the recent strong suggestions of an Office Depot or Staples takeover, chairman van den Hoek, said: "We are in regular contact with all the major players, there aren’t that many and we all know them very well. But I should repeat, although I hate to do so, that we are not commenting on rumours."
 
Speaking of the new management structure and personnel changes at CE, van den Hoek added: "The most important of those changes is Frans Koffrie. We have reached a conclusion that he is not the right man to lead the company in the next stage of its development. I think Frans deserves all the credit for the transformation process that he has steered. But he himself has concluded that he is not the execution-driven sort of manager that we need.
 
"The change in the CEO position is a function of the outcome of the strategic review. Since March, we have held five or six Supervisory Board meetings, so the Executive Board has from the start taken the Supervisory Board completely on board with the process, the way it should be organised, the various steps, the decision moments and what have you.
 
"Only in the latter part did we come to the conclusion what the outcome would be and, of course, therefore in the latter part of that review we came to the conclusion, together with Frans Koffrie, that he would be succeeded by Peter Ventress."
 
Ventress provided an insight into his vision for the group’s global presence. "There are some countries where we would consider our market position to be sub-optimal and in those areas we would clearly look to continue to grow organically but where necessary look for further acquisition to grow," he said. "And then there are other economies, the faster-growing economies in Eastern Europe and the Far East, where in the future we believe Corporate Express will need to be represented and we will look for the right timing and opportunity to expand our global network into these different areas.
 
"We’ve worked through this strategic review for the last five months. We’ve come up with a very clear conclusion and a very compelling argument as to why this is the best way to create shareholder value.
 
"And we’ve put together a road map that really takes us from where we are today to the kind of growth and profitability targets that we have set for the next three years. And a lot of the work in the next weeks and months is about making sure we have the right infrastructure and organisation in place and then rolling out these plans over the next three years along a clear timetable with clear operational milestones and clear targets for our own employees to follow."
 
CE also announced a Q3 2007 trading update disclosing its estimated organic growth numbers for its North American and European activities.
 
Office Products North America is estimated to realise organic growth of a negative one percent in Q3 versus a negative three percent in Q2 and a negative one percent in Q1. The company said it had seen no change in market conditions compared to its Q2, with the US office supplies market being in "modest" decline.
 
Office Products Europe is estimated to report organic growth of seven percent in its Q3, versus five percent in Q2, continuing to take market share.