US bidder won’t rule out Smurfit Kappa approach

Irish packaging giant now valued €3.4bn below the level US suitor International Paper offered to pay last year

SMURFIT Kappa is now valued €3.4bn below the level rival International Paper (IP) was offering for the business one year ago.

After tough resistance from Smurfit Kappa’s board, Memphis-based IP decided not to proceed with its bid and walked away in June.

Once it did, Irish takeover rules prohibited IP making another offer for a year - meaning it will be free to rekindle its approach for Smurfit Kappa in a little over two months.

Yesterday, the US company declined to rule out another approach, saying it will not comment on “rumour or speculation”.

The fall in the Irish company’s share price in the interim could leave Smurfit Kappa shareholders more open to such an approach.

IP’s own stock is down about 15pc since it made its highest bid - which was to be part funded with shares, while Smurfit Kappa shares are down around 25pc.

Last year IP said there was a “compelling strategic and financial logic” for a combination of the two companies, which would marry IP’s strong position in the US with Smurfit’s robust status in Europe.

IP also said the deal would also generate substantial “synergies” - meaning that the group would be able to cut costs overall from economies of scale i.e. getting discounts for buying more inputs in one go.

Almost exactly a year ago, on March 26 2018, IP made an enhanced takeover proposal valuing Smurfit Kappa at €39.71 a share - made up of €25.25 in cash and the rest in shares in the new business.

That valued Smurfit at €9.4bn. Yesterday Smurfit shares closed at €25.52 each, giving a market capitalisation of just over €6bn for the Irish firm.

Shares were €28.62 before IP’s first approach. Smurfit Kappa would not comment yesterday on whether it would be more open to a second approach.

Smurfit’s board told shareholders last year that selling to IP would be a mistake because it “fundamentally undervalues the group”, adding that “the best interests of the group’s stakeholders are served by pursuing its future as an independent company, operating as the European and Pan-American leader in paperbased packaging.”

Last year the company posted record earnings of more than €1.5bn. Chief executive Tony Smurfit said the company was “very well positioned to capitalise on industry opportunities and to deliver consistently excellent performance for all stakeholders”.

“The current year has started positively, and together with the continued development of sustainable packaging, e-commerce and other demand drivers, SKG has an exciting future,” he said.

IP said there was “a compelling strategic and financial logic” behind its bid for Smurfit Kappa