Smurfit shares hold gains despite rival ending bid

By Eamon Quinn

Smurfit Kappa’s successful defence of a bid from its much larger rival International Paper has been awarded by gains for the packaging firm’s shares and endorsements from a much-increased price target by a local analyst.

The shares retained most of the huge 20% spike they received in early March when International Paper revealed it had approached the Irish multinational.

The US giant subsequently upped its offer to value Smurfit at €39 a share.

However, despite facing pressure from some leading shareholders, Smurfit led by chief executive Tony Smurfit and chairman Liam O’Mahony, refused to formally engage with its much larger rival, saying the talks it had held over two occasions convinced it that the offer was too low.

Smurfit showed its confidence by announcing last month its own acquisition for €460m of Dutch firm Reparenco, a deal that was hailed by analysts. That strategy appeared vindicated when after a sharp slide in recent days the shares rose slightly yesterday despite International Paper walking away after failing to increase its offer by a deadline.

Davy said it raised its price target to €42 a share because it believes Smurfit’s assets are worth up to €45 a share.“It is little wonder therefore that the board rejected the proposal from International Paper,” it said.

Merrion Capital said the main reason International Paper failed was its failure to meet expectations for a takeout bid over €40 a share.

It is a lot less bullish than Davy, however. However, hailing the Reparenco purchase, Merrion said it was sticking to its “fair value of €38” for Smurfit and saw “any weakness toward €31 or €32 as an opportunity for a trade higher”.

“The paper and packaging industry in a sweet spot at present with ongoing consolidation, increasing demand driven by online purchases and favourable pricing,” Merrion said.

Mr Smurfit said the company had been clear that the offer by International Paper had fallen far short. The company was not for sale and it would expand by acquisitions, he told Bloomberg TV.

He said the industry was in good shape and would in time benefit from the switch from plastic to cardboard packaging.


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