Wednesday 22 August 2018

London listing could help seal €8.6bn Smurfit Kappa deal

Smurfit Kappa’s Tony Smurfit
Smurfit Kappa’s Tony Smurfit
John Mulligan

John Mulligan

International Paper, the US firm that has made an €8.6bn approach to buy Irish packaging giant Smurfit Kappa, is understood to have considered a secondary stock market listing in London in order to overcome any issues Smurfit Kappa institutional shareholders may have in accepting shares in the US company as part of a takeover deal.

It's also possible that International Paper - quoted on New York's Nasdaq - could raise the cash element of its indicative offer for Smurfit Kappa to €26 a share from €22, for instance, without causing any significant issues with ratings agencies regarding its own current leverage position.

Increasing the cash component of the proposed deal by that amount would bring the total offer price to just over €38 per share, valuing Smurfit Kappa at close to just over €9bn. That's based on International Paper's $52.18 share price yesterday morning in the US.

It's thought that the share element of the proposed deal could cause difficulties for some Smurfit Kappa shareholders, with some funds unable to hold US equities.

However, a secondary International Paper listing in London would overcome such problems.

It's also believed that despite Smurfit Kappa's vociferous opposition to the proposed takeover offer from International Paper earlier this month, contact has continued between the sides. International Paper has also been courting major Smurfit Kappa investors in an effort to engineer a takeover offer that would be acceptable to them.

Smurfit Kappa CEO Tony Smurfit has pilloried the indicative offer from Memphis-based International Paper.

He said that the offer was "opportunistic" and that it was not "remotely acceptable" and that the Smurfit Kappa board had seen "no merit" in the proposed transaction. He has also insisted that the cultural differences between the businesses would be an obstacle to a deal.

But many analysts believe a marriage between International Paper and Smurfit Kappa makes sense. The US firm generates 75pc of its revenue in the Americas, while Smurfit Kappa makes 75pc of its revenue in Europe.

Irish Independent

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