Saturday 20 October 2018

Smurfit Kappa's US ambitions under scrutiny amid claims

Smurfit Kappa’s Ken Bowles. Photo: MAXWELLS DUBLIN
Smurfit Kappa’s Ken Bowles. Photo: MAXWELLS DUBLIN

Gretchen Friemann

Smurfit Kappa's expansion ambitions in the US are coming under increasing scrutiny by investors amid mounting speculation the Dublin-based company acted as a rival suitor to a US-based packaging firm, WestRock, in its successful $3.5bn (€2.8bn) bid for KapStone Paper.

Documents filed to the Securities and Exchange Commission (SEC) in Washington DC reveal WestRock faced competition for its target from two other contenders, fuelling expectations Smurfit Kappa participated in the race.

Europe's largest box maker has made no secret of its intentions to ramp up its presence in the US after spurning two takeover offers from International Paper.

An acquisition of KapStone would have required shareholder approval and while substantial, is not beyond its reach, according to analysts. SEC filings on the WestRock and KapStone merger show the larger, Atlanta-based corrugated packaging company fended off interest from two unnamed industry rivals to secure its quarry.

Last week investors in London questioned whether Smurfit Kappa leapt into the race late last year, potentially submitting a non-binding offer in an effort to bulk up ahead of any unwelcome takeover approach. Regulatory filings on the WestRock acquisition detail alternative offers from the two competitors. A reference in the document to KapStone's concerns at "Party B's ability to consummate a potential business combination" as it "would be subject to the approval of certain regulatory authorities and Party B's shareholders" raised eyebrows in some investors circles.

Smurfit Kappa derives close to 73pc of its Ebitda (earnings before interest, taxes, depreciation, and amortization) from Europe and the group's finance chief, Ken Bowles, said the company is looking at potential takeover targets in the US.

However, London-based investor sources pointed out there are "no other assets [Smurfit Kappa] can buy that can be as accretive" as a near €40a share buy-out offer.

Smurfit Kappa declined to comment.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business