June 3 (Bloomberg) -- Staples Inc., the world's biggest office-supplies retailer, raised its hostile offer for Corporate Express NV to 1.67 billion euros ($2.6 billion) after the Dutch company rejected two bids and agreed to buy a French rival.

Staples increased its bid by 14 percent to 9.15 euros a share in cash and said today that Corporate Express investors owning 23.3 percent of the company already agreed to sell their shares. The Amsterdam-based distributor said in a separate statement that it will ``carefully review'' the increased offer.

``The game is over,'' said Marcel Hooijmaijers, an analyst at Landsbanki Kepler in Amsterdam. ``This is a knock-out bid.'' Hooijmaijers recommends investors hold Corporate Express stock.

Corporate Express, the world's biggest distributor of office supplies to companies, rose as much as 7.9 percent in Amsterdam trading. The planned takeover would bolster Framingham, Massachusetts-based Staples' most profitable unit, which sells office supplies directly to companies, and help counter the slowdown in revenue to consumers and small businesses. The Dutch company makes more than half of its sales in the U.S.

The offer is 69 percent higher than Corporate Express's share price on Feb. 18, before the initial approach, and is conditional on investors rejecting the Dutch company's agreement to purchase Lyreco SA.

Corporate Express rose 56 cents, or 6.7 percent, to 8.93 euros at 1:44 p.m. in Amsterdam. A close at today's high price of 9.02 euros would be the highest since Aug. 14.

Increased Revenue

Buying Corporate Express would boost Staples' direct sales in North America by 3 billion euros. The U.S. company's 2007 delivery revenue in the region was $6.61 billion.

Staples forecast sales to increase by ``mid single-digits'' while Corporate Express aims for growth of as much as 3 percent this year, excluding the impact of currency swings. Corporate Express's first-quarter operating profit in North America as a percentage of sales was 3 percent, less than a third the margin Staples generated in the period at its delivery business.

Corporate Express agreed to buy French competitor Lyreco in an offer valued at 1.73 billion euros on May 21. Lyreco, the largest distributor of office supplies in Europe, would get a 29.9 percent stake in the Dutch company as part of the bid. Corporate Express, which earlier rejected Staples' offers of 7.25 euros and 8 euros a share, has called a June 18 meeting of shareholders to approve the Lyreco purchase.

``In our view, the odds now look more in favor of Staples,'' ING Wholesale Banking analyst Marc Zwartsenburg wrote today in a note to investors. He maintained his ``buy'' recommendation on the shares.

Relative Value

The retailer's offer values Corporate Express at 5.2 times earnings before interest, taxes, depreciation and amortization, according to Bloomberg data. Corporate Express's bid for Lyreco valued the French company at 9.6 times 2007 earnings on that basis, excluding extraordinary items, it has said.

``Staples' offer provides certain and immediate cash value, without the significant risks found in Corporate Express' long- term business plan, with or without Lyreco,'' said Ron Sargent, chief executive officer of Staples, in the statement.

Lyreco spokeswoman Anne Da Silva Passos said today that the company has ``no comment for the moment.'' Corporate Express will have to pay Lyreco shareholders a breakup fee of 30 million euros if it pulls out of the transaction, the company has said.

Conditions

Staples today lowered the condition for the minimum acceptance of the bid to 51 percent of the voting rights attached to the shares. The company has obtained U.S. and Canadian antitrust clearance for the offer and is ``confident'' European Union approval will be granted by June 17. Under Dutch law, an acquirer can raise its offer for a target company once during a tender period. Staples initial offer was a proposal rather than a firm bid.

The shareholders who support the increased bid include Centaurus Capital Ltd., York Capital and Halcyon, Staples said in the statement. They will tender their shares and vote against the Lyreco takeover at the June 18 meeting, Staples said.

Bid speculation first surfaced last year after Centaurus, a U.K. investment firm that pressed Dutch food retailer Royal Ahold NV to sell assets in 2006, bought 5 percent of Corporate Express following a review of the business.

The company opted against seeking a buyer in October and replaced Chief Executive Officer Frans Koffrie with Peter Ventress, previously head of its European unit.

To contact the reporter on this story: Joram Kanner in Amsterdam at jkanner@bloomberg.net.

Last Updated: June 3, 2008 07:49 EDT