Smurfit CEO says takeover proposal 'not remotely acceptable'
International Paper’s culture would be entirely different to that of Dublin-based packaging giant Smurfit Kappa, and the Irish company will continue to pursue an independent future, according to its chief executive, Tony Smurfit.
Speaking to Independent.ie this morning after Smurfit Kappa rejected a takeover proposal from International Paper, Mr Smurfit insisted the approach is "so far away" from anything that the Smurfit Kappa board "would even remotely consider" acceptable.
Smurfit Kappa’s shares soared 18pc to €33.84 this morning following the approach, giving the FTSE-100 company a market capitalisation of just under €8bn. The company is Europe’s largest maker of paper-based packaging material, and also has operations across Latin America.
International Paper tabled its offer proposal for Smurfit Kappa within the past two weeks, according to Mr Smurfit, without specifying the precise date.
He said he had already spoken to two of Smurfit Kappa’s major shareholders this morning, and would take to more today. The group’s single biggest shareholder, with about 7pc, is Norway’s government pension fund. Others include Singapore’s sovereign wealth fund, GIC, with 3.1pc .
Details of the proposal from International Paper weren’t made public. However, it would have involved Smurfit Kappa shareholders receiving a significant portion of proceeds from a sale in the form of International Paper shares.
"Our shareholders have been incredibly supportive of the strategy which we’ve been on. We have always said that we were an undervalued share. We have been closing that discount as we reduced our leverage and improved our performance," Mr Smurfit told Independent.ie.
He added: "That has been a work in progress, and that’s why this [proposal] is very opportunistic to try and take advantage of Smurfit Kappa before that gap has closed fully and before we’ve been able to start implementing the fantastic plans that we have."
Asked if the broader idea of a combination between Smurfit Kappa and International Paper had any merit, Mr Smurfit said that the cultures of the firms are different, and that Smurfit Kappa is a “complex” operation.
"It’s a service provider to a lot of different companies – 65,000 customers. So therefore, we are a complex business," he said. "Part of the great skill of Smurfit Kappa is a kind of culture we have within the company, to have a familial type of company in a very big organisation.
"The culture of International Paper will be very different to Smurfit Kappa’s culture,” he added. "That’s just the way – they’re based in Memphis, Tennessee, and that’s a different type of culture to an international complex company like ourselves. So, therefore the board sees no merit in the proposed transaction that’s been put forward."
Smurfit Kappa reported revenue of €8.52bn last year, and earnings before interest, tax, depreciation and amortisation of €1.24bn.
International Paper had sales of $21.7bn (€17.6bn) last year, and net earnings of $2.1bn (€1.7bn).
Last month, Smurfit Kappa said that it would invest an extra €1.6bn in its business between now and 2021 as it seeks to drive superior returns from the group.
It's the largest four-year investment plan ever initiated by the company, and will include new machinery, product innovation, depots and production plants.
"We have a really fantastic future ahead," Mr Smurfit told Independent.ie. "The company and the board recognise that. The proposal that was given to us was so far away from anything that the board would even remotely consider, that they unanimously and unequivocally rejected it."
He said: "The board mandate is to view what is put in front of us. What is put on front of us at this juncture is a proposal that is significantly below what we would even contemplate."