Belfast Telegraph

Irish packaging giant continues to shun US suitor despite improved takeover offer

By Gretchen Friemann

US packaging goliath International Paper plans to meet major Smurfit Kappa shareholders as it embarks on a charm offensive aimed at forcing its board to enter takeover talks.

Yesterday the Dublin-based company, and Europe's largest cardboard box producer, delivered a stout rejection to a sweetened offer from International Paper.

The offer included a 15% increase in the cash component of the bid and, overall, valued Smurfit Kappa at €9.5bn.

However, the renewed approach was given short shrift by the board of the Irish company, which has premises in Lurgan, Co Armagh. Smurfit Kappa chairman Liam O'Mahony characterised the fresh offer as paper-thin, dismissing it as little "more than compensation for the fall in International Paper's share price".

He said the new bid "again entirely fails to value the group's true intrinsic business worth and future prospects".

But the decision to swiftly rebuff this latest tilt has caused unease among Smurfit Kappa's investors.

A number of stakeholders were reiterating their willingness to sell the stock at €38 to €39 per share - below the €40 per share price point widely considered as a catalyst for a possible deal.

The frustration built during the day as International Paper's share price steadily increased, taking the value of the bid to close to €38 a share - some distance above its original offer, tabled on March 5, of €36.46 a share.

The sharp deterioration in International Paper's market capitalisation since then - its shares have fallen by 15% over the past few weeks - had been attributed in part to its investors' lacklustre reception to the proposed takeover. Yet analysts emphasised the US behemoth's peers have also slumped by 8-14% recently following a drop in the value of the raw material used to manufacture packaging, as well as the bellicose trade rhetoric emanating from The White House, which has stoked fears of a global trade war.

If International Paper's shares traded back at $58, their pre-bid level, the revised offer would equate to €38.90.

At this valuation, investor sources argued Smurfit Kappa would need to be very confident in the support of its register to persist with its non-engagement stance.

The Memphis-headquartered International Paper expects to extract €450m or 50% of Smurfit Kappa's total sales in the first four years - higher than initial market forecasts of about €300m.

Belfast Telegraph

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