Smurfit Kappa defiant on €9bn IP offer as profits rise
At an annual general meeting punctuated by just one question from the tiny number of small shareholders present, packaging giant Smurfit Kappa again remained defiant in its opposition to a takeover approach from Memphis-based International Paper for the €8bn Irish group.
International Paper (IP) has been circling Smurfit Kappa since February, and has made two indicative offers for the Irish company that management have rejected. IP CEO and chairman Mark Sutton has previously indicated that his patience for a deal will likely wear thin and expire by July.
Speaking at yesterday's AGM, Smurfit Kappa chairman Liam O'Mahony said that the board continues to believe that the company's prospects are best advanced as an independent company.
He said the proposals from IP "entirely fail to value the group's true intrinsic business worth and prospects".
IP's revised cash and share proposal delivered at the end of March currently values Smurfit Kappa at €38.23 per share, or €9.06bn. IP's shares closed at $51.17 on Wednesday, lower than the $52.37 they were at on March 26 when the revised proposal was made.
Mr Sutton has described the potential acquisition of Smurfit Kappa as "very compelling".
Mr O'Mahony and Smurfit Kappa CEO Tony Smurfit met Mr Sutton in London in February where the initial approach was tabled.
Speaking after the AGM yesterday, Mr Smurfit said that meeting had been "professional".
He added that the approach from IP has diverted his attention and that of chief financial officer Ken Bowles from the day-to-day running of the business.
"It is fair to say that myself and Ken have spent more time on this than regular business, but it is equally fair to say that the organisation is getting on with its day-to-day business and working very hard," he said.
Mr Smurfit would not be drawn on specific questions relating to IP's offer, including its valuation, due to takeover rules. However, he has previously cited cultural differences between the two companies as one of the reasons why he did not believe a marriage of the two firms would work.
Mr Smurfit declined yesterday to say what he believed those cultural differences were, but said one analyst had likened the pair to "oil and water".
He also said consolidation within Smurfit Kappa's sector "will happen at a much slower pace in Europe than it has happened in the US".
More than 50pc of firms in the sector in Europe are privately owned, compared to about 25pc in the US, he said.
Smurfit Kappa yesterday reported a 22pc surge to €340m in its first quarter earnings before interest, tax, depreciation and amortisation (ebitda), a performance certain to have strengthened the company's resolve to spurn IP.
It said its outlook is for 2018 ebitda to be "materially better" than the €1.24bn generated in 2017.
Mr Smurfit said the company does "not believe in cycles", when asked about speculation from some investors that the sector is near a cyclical peak.
"The variation in our earnings has been very minimal, other than going on an upward trend," he said.