Smurfit Kappa said it will buy Dutch paper and recycling firm Reparenco for about €460m, increasing the intrigue as it continues to try and see off a takeover bid from rival International Paper (IP) of the US.
IP faces a deadline of June 6 to decide whether to make its offer hostile, if Smurfit fails to engage before then, or walk away. Analysts say current shareholders may have little to lose by holding tight until then.
Smurfit said the acquisition of the privately-owned business accelerated its strategic objectives under a four-year plan laid out in February when it said it would increase investment in its existing businesses by €1.6bn.
Negotiations to buy the business that generated €41m of core earnings in the 12 months to April 2018 began in February, Smurfit said, before IP made its first approach. Darren McKinley, senior analyst at Merrion, said the acquisition by Smurfit “raises the intrigue ahead of June 6”.
He hailed the deal as strengthening Smurfit’s operations across Europe, and struck at an attractive price for Smurfit. “The acquisition of Reparenco is complementary with our existing business; strengthens our integrated business model; and accelerates a central element of our medium term plan,” Smurfit chief executive Tony Smurfit said.
Smurfit Kappa twice frustrated a bid to combine the largest listed US paper packaging firm with Europe’s biggest, most recently rejecting a raised takeover offer from IP in March, arguing it was better served pursuing its future independently.
IP, whose cash and shares offer in March valued the Irish group at €8.9bn, said last week it would not make a hostile bid after being given until June 6 to make a binding offer or walk away.
At around €34.40, Smurfit shares were little changed in Dublin, valuing the firm at €8.18bn. IP is the much bigger of the two firms. Its shares were also little changed, valuing the New York-listed giant at over $22.5bn (€19.2bn). The Financial Times has reported that a trio of Smurfit shareholders have asked the Irish firm to enter talks with IP.
It quoted British asset management firm Janus Henderson, which holds a 4.3% stake, as saying Smurfit should either get around the table to seek a higher price, or explain why it was not engaging.
Smurfit’s CEO told an analyst call on the Reparenco deal that the board was unanimous in rejecting IP’s unsolicited approach.
An IP spokesman said the company was confident that engagement with Smurfit would unlock the deal’s value potential.
Irish Examiner and Reuters staff