International Paper drops Smurfit Kappa bid

By Richard Stuart-Turner, Thursday 07 June 2018

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International Paper has dropped its interest in acquiring Smurfit Kappa after a “lack of engagement” by the corrugated packaging giant over the deal.

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International Paper valued Smurfit Kappa at €8.9bn (£7.8bn), not including debt, in March

In February 2018 International Paper, a global producer of renewable fibre-based packaging, pulp and paper products, provided representatives of Smurfit Kappa’s board of directors with a proposal to acquire the company.

Following discussions with shareholders of both companies, International Paper put forward a revised proposal at the end of the following month, valuing Smurfit Kappa at €8.9bn (£7.8bn) not including debt.

International Paper said it believed the revised proposal “was highly attractive and formed a sound basis for engagement”, which the company viewed as essential to determining the full value potential of the combination.

But Smurfit Kappa chairman Liam O'Mahony said at the time that the proposal “entirely fails to value the group’s true intrinsic business worth and future prospects”.

In a note to the Irish Stock Exchange on Tuesday (5 June), International Paper chairman and chief executive Mark Sutton said: “While we continue to believe in the strategic and financial potential of this combination, our commitment was to proceed in a disciplined manner that would create value for both sets of shareholders.

“Moving forward, we remain focused on executing our strategy and are excited about our outlook. We have many levers to create shareholder value and will be responsible stewards of our shareholders’ capital.”

Under Irish takeover rules, International Paper is unable to make a fresh attempt to by Smurfit Kappa for 12 months.

In a response issued yesterday, Smurfit Kappa said it believes it has “superior prospects as a standalone business and remains excited about the group's prospects in the short, medium and long-term”.

Smurfit Kappa Group chief executive Tony Smurfit said: “We continue to see the benefits from our investments in recent years and we are now executing a central element of our medium-term plan with the acquisition [last month] of [Dutch paper and recycling firm] Reparenco.

“[This] will have a positive impact on our integrated model and we are targeting delivery in excess of €30m of synergy benefits. Strong business conditions and a positive operating environment together with significant and early progress against our medium-term plan reaffirms our confidence that 2018 EBITDA will be materially better than 2017.

“We expect the second quarter to represent another strong performance and we will provide a further update at the time of our half-year results on 1 August.”

Shares in Smurfit Kappa, which is headquarted in Dublin and listed on the London Stock Exchange, climbed by more than 3% to 3,016p in early trading yesterday but have since settled down to 2,924p at the time of writing.

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