- The Washington Times - Tuesday, March 6, 2001

U.S. Office Products, with headquarters in Washington, is selling its core business to competitor Corporate Express and filing for Chapter 11 bankruptcy protection after racking up more than $1 billion in debt.

Corporate Express, based in Broomfield, Colo., is buying the North American office products operations, including some stand-alone furniture businesses, for $250 million.

"We had too much debt to service," said Laura Smith, vice president of investor relations for U.S. Office Products. "The best opportunity for the company the future was going to be to partner up and merge with strategic buyers."

The retail holding company, started by Washington Capitals' part owner Jonathan Ledecky in 1994, also is selling off some of its other businesses.

Mail Boxes Etc., a chain of 4,300 business and shipping centers, will be sold to United Parcel Service for $200 million. U.S. Office Products also has reached an agreement to sell USRefresh, its coffee vending operation, and is negotiating the sale of its Blue Star Group, which owns commercial printing, retail book and stationery operations in New Zealand and Australia.

U.S. Office Products, which has a total of 9,250 employees, will be integrated into Corporate Express pending bankruptcy and regulatory approval.

Corporate Express will examine duplicate operations, including facilities and overhead structures, and decide what operations and employees will be needed.

Corporate Express has 1,500 delivery vehicles and U.S. Office Products has about 800 some with overlapping routes.

"There's an opportunity for consolidation," said Mark Hoffman, president of North American Office Products for Corporate Express.

U.S. Office Products has 375 employees in the Washington area.

Mr. Hoffman said the two companies are "complementary" as Corporate Express serves larger corporate clients and U.S. Office Products' client base is midsized companies.

With this acquisition, Corporate Express, a subsidiary of Buhrmann NV, a Dutch international business services and distribution group, will add about $1 billion in sales to its $4.4 billion business.

Mr. Ledecky founded publicly traded U.S. Office Products as a way for small office-supply companies to compete against big players like Staples. The business grew to include computer services, corporate-travel services and school supplies under the U.S. Office Products umbrella.

By 1997, the company had $2.1 billion in sales and $133 million in net income.

In June 1998, as part of a reorganization, the company spun off four of its divisions and sold about 25 percent of the company to investment firm Clayton, Dubilier & Rice for $270 million. Mr. Ledecky stepped down as chairman.

The decision to sell a part of the company to Clayton, Dubilier & Rice was a fatal move for the holding company, said Murray Stahl, chairman of Horizon Asset Management in New York.

"If they were better capitalized, they would have been able to respond [to competition]," Mr. Stahl said. "They needed to find someone to inject equity into the company. They never really moved on that."

U.S. Office Products had a net loss of nearly $194 million on $2.5 billion in sales last year.

In over-the-counter-trading yesterday, the company closed at less than 5 cents a 3-cent drop from Friday's closing. The company's six-month high was 45 cents a considerable drop from shares trading at $56 in 1997.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide