International Paper Ends Smurfit Pursuit After Bids Rebuffed

(Bloomberg) -- International Paper Co. ended its pursuit of Smurfit Kappa Group Plc after the Irish packaging manufacturer rebuffed two takeover offers and refused to engage in talks.

The Memphis, Tennessee-based company confirmed before a Wednesday deadline and after a report from Bloomberg News that it won’t make a formal bid. Smurfit rejected the earlier proposals as too low, and said on Wednesday it has “superior prospects” by remaining independent. Smurfit shares rose 3.4 percent.

“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,” International Paper Chief Executive Officer Mark Sutton said in a statement. “We have many levers to create shareholder value and will be responsible stewards of our shareholders’ capital."

Acquiring the company, valued at about 8.1 billion euros ($9.5 billion), would have made International Paper the No. 1 producer of cardboard boxes in Europe. The takeover saga, lasting more than three months, has seen Smurfit rebuff two bids in March: the first was a cash-and-stock proposal at 36.46 euros per share, and a second at 37.54 euros. The stock rose 3.4 percent to 34.38 euros at 8:10 a.m. on Wednesday. Shares of International Paper settled 0.1 percent lower at $57.19 in New York.

Smurfit said it “remains excited” about its prospects, reaffirming its confidence that 2018 earnings will be “materially better” than 2017 and pointing to its move to buy Reparenco, a privately owned paper and recycling business in the Netherlands, for about 460 million euros.

“We continue to see the benefits from our investments in recent years,” said CEO Tony Smurfit.

“We wouldn’t be surprised to see another try in 2019 after the one-year ban on making a new bid expires,” Joshua Zaret and Evan Lee, analysts at Bloomberg Intelligence. said in a report on Tuesday. “The deal would have expanded IP’s international exposure significantly, given Smurfit’s strong presence in European and Latin American corrugated-packaging markets.”

The takeover effort came amid a wave of industry consolidation, increasing packaging prices and global economic growth. DS Smith Plc on Monday agreed to buy Spanish packaging supplier Europac for 1.9 billion euros including debt. Earlier this year, WestRock Co. agreed to buy KapStone Paper & Packaging Corp. for about $3.5 billion.

“The fundamentals of the European packaging sector are in excellent shape,” Barry Dixon, an analyst at Dublin securities firm Davy, wrote as he raised the company’s price target to 42 euros. “It is little wonder therefore that the board rejected the proposal from International Paper.”

Davy advised Smurfit during the bid process.

--With assistance from Dara Doyle, Simon Casey, Ed Hammond and Jen Skerritt.

To contact the reporters on this story: Aaron Kirchfeld in London at akirchfeld@bloomberg.net;Dinesh Nair in London at dnair5@bloomberg.net;Peter Flanagan in Dublin at pflanagan23@bloomberg.net

To contact the editors responsible for this story: Daniel Hauck at dhauck1@bloomberg.net, Tara Patel, Millie Munshi

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