Wednesday 18 September 2019

Smurfit Kappa's bolt-on piles pressure on bidder

CEO Tony Smurfit said talks on deal started last February. Photo: Maxwell Photography
CEO Tony Smurfit said talks on deal started last February. Photo: Maxwell Photography

Gretchen Friemann

Smurfit Kappa's decision to buy Dutch packaging recycling business Reparenco for €460m has piled pressure on the group's US suitor, International Paper (IP), just as the market was braced for a fresh bid ahead of a deadline set by the Irish Takeover Panel.

Memphis-based IP, the world's biggest paper company by sales, has until June 6 to make a binding offer for Europe's largest box maker, or face a 12-month ban from making another approach.

The "put up or shut up" ruling prompted many in the market to assume International Paper would wait until the eleventh hour before submitting a third bid, a tactic to generate share holder pressure.

That so-called bear hug strategy was seen to gather momentum this week when Janus Henderson, a major stakeholder Smurfit, urged the board to engage with IP. It marked the first public discontent from a traditional fund manager.

According to sources, so called event-driven funds, Davidson Kempner and York Capital have also voiced frustration to Smurfit's board at the lack of interaction with IP.

However, two months since the first offer from IP, there has been little public unrest among Smurfit shareholders.

One source argued IP's approach "has been too light" so far to warrant a stronger reaction from investors.

The acquisition of Reparenco has been widely interpreted as a defence measure by Smurfit.

However, CEO Tony Smurfit, said discussions on that deal started in February, before IP's initial offer.

He characterised Reparenco as "complementary with our existing business" and said the deal "strengthens our integrated business model and accelerates a central element of our medium term plan".

Merrion stockbrokers called the Reparenco purchase as a "good bolt-on acquisition" and said it presented another reason for IP to increase its bid.

The US heavyweight has so far submitted two rebuffed offers with the latest cash and share bid valuing Smurfit at €8.9bn.

The second tilt, mounted at the end of March, equated to a price of €37.54 - far below the €40 a share valuation widely touted as the prospective deal's floor. Since then an increase in IP's share price, lifted the offer to €39.70, a whisper away from the €40 level seen by many as the dealbreaker.

Mr Smurfit stressed on an analyst call yesterday, on the Reparenco deal, that the Smurfit Kappa board remained unanimous in rejecting IP's unsolicited approach.

Irish Independent

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