International Paper's Pursuit of Smurfit Kappa May Turn Hostile

(Bloomberg) -- International Paper Co. isn’t likely to back down in its play for Irish packaging manufacturer Smurfit Kappa Group Plc and could go hostile, according to two analysts tracking the industry.

Smurfit on Monday rejected International Paper’s revised, unsolicited cash-and-stock offer of 37.54 euros per share as inadequate. Memphis-based International Paper has clearly been looking at Smurfit for a while, and its timing may be right as rival WestRock Co. is tied up with its acquisition of KapStone Paper & Packaging Corp., according to Mark Wilde, an analyst with BMO Capital Markets Corp. in New York.

“It may be IP goes directly to Smurfit shareholders,” Wilde said by telephone. “I think at this point they don’t have a real obvious competitor for Smurfit.”

International Paper will probably first submit a formal bid to Smurfit and go straight to shareholders if the Irish company’s board doesn’t respond or seem willing to negotiate, said Chip Dillon, an analyst at Vertical Research Partners. The two companies will probably end up negotiating a deal, allowing Smurfit to extract more value for its investors, Dillon said.

“I think the odds of a walkaway are very slim,” Dillon said in a telephone interview. “They’re serious buyers, they’ve increased their offer and they’re not even bidding against anybody.”

Smurfit declined to comment on whether International Paper goes hostile. "We see compelling strategic and financial logic for a combination and view our latest proposal as attractive for both sets of shareholders,” International Paper spokesman Thomas Ryan said via text message in response to a request for comment.

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