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Staples Plans to Combine Catalog and Staples.com Operations

Staples, Inc. (NASDAQ: SPLS) plans to merge its small-business and consumer catalog operation, called Direct, with Staples.com in order to better serve the needs of its customers - many of whom are cross-channel shoppers who make purchases from both the catalog and the e-commerce business.

As a result of this planned integration, Staples is withdrawing its planned initial public offer of Staples.com tracking stock and, subject to shareholder approval, will convert Staples.com stock into Staples, Inc., common stock.

Jeanne Lewis, formerly president of Staples.com, has been promoted to the new position of president of Direct.com and will lead the unified Direct and Staples.com business.

"The integration of Staples.com with our catalog business will be a home run both for our customers and our shareholders," said Thomas G. Stemberg, chairman, CEO and founder of Staples, Inc. "The vast majority of customers who migrate from Direct to Staples.com also continue to buy from Direct. As a result, they buy more overall from Staples than they did as one-channel shoppers. By combining Direct and Staples.com, we'll be able to operate more effectively and efficiently with a unified merchandising team, a unified marketing team and a unified customer support team. The integration also will allow us to eliminate the administrative costs that come from operating separate business units."

Staples has found that its shoppers are increasingly purchasing through multiple channels, with many customers shopping at the Staples stores, catalog and Staples.com. Customers who shop at Staples stores and through its catalogs spend 2.5 times as much per year as those who only shop Staples stores. Customers who shop all three channels - Staples stores, catalog and Staples.com - spend on average 4.5 times as much per year as customers who only shop the stores.

In order to convert Staples.com stock into Staples common stock, shareholders must approve the measure at the annual meeting, to be held this spring. Under the terms of the proposal, Staples would convert each issued and outstanding share of Staples.com stock into 0.4396 share of Staples RD stock, currently the name for the company's common stock. The measure, if approved, would simultaneously rename Staples RD stock as Staples common stock. Staples.com stock options would be converted into Staples common stock options using the same formula.

Source: Staples, Inc March 20, 2001

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