Irish paper and packaging giant Smurfit Kappa has rejected a raised takeover offer from US rival International Paper, but a sharp 3.4% fall in Smurfit shares may well signal the hostile suitor is so far winning the €8.9bn bidding war, writes Eamon Quinn.
Earlier this month, shares in Smurfit leaped almost 20% to €33.86, valuing Smurfit then at over €8.1bn, after IP made a takeover approach that was rejected by Smurfit.
By market value, Smurfit is the third-largest Irish multinational behind CRH and Kerry. The approach by IP, whose market value of $21.45bn (€17.36bn) is almost twice Smurfit’s value, had put the leading Iseq and Ftse 100 company into play.
Smurfit runs its huge operations across Europe and South America from its head offices and distribution centres employing hundreds of staff in Dublin.
However, yesterday, the shares fell to €33.58, a drop of 3.4% on the day after Smurfit rejected a sweetened offer.
A falling share price could weaken Smurfit’s defences, while IP shares, up 4% at one stage, could bolster its assault. Smurfit said its board had unanimously rejected the increased offer of €25.25 in cash and 0.3 new International Paper shares. The offer valued Smurfit at €8.9bn based on IP’s closing price last week.
Smurfit said that remained well below valuations in recent industry transactions. “We believe our revised proposal is responsive to the views of Smurfit Kappa shareholders and provides a sound basis upon which to secure a recommendation from Smurfit Kappa’s board,” IP said. The global paper and packaging industry hasn’t seen such a potential mega-deal since former chief Michael Smurfit assembled a series of huge transactions starting about 15 years ago. A management buyout funded by US equity firms, and subsequently the acquisition of Kappa Packaging, originally from the Netherlands, meant Smurfit Kappa controlled a substantial share of the cardboard packaging market across continental Europe.
IP, with huge box-making facilities in the US, has very little presence in Europe, outside of Spain.
Smurfit employs 45,000 staff in 35 countries around the world, has 36 mills, and owns extensive forests.
- Additional reporting Reuters