Smurfit Kappa Denies Acquisition Proposal Submitted by International Paper Company
MEMPHIS, TN - In an effort to further embed itself within the industry, Memphis, Tennessee-based International Paper Company submitted a proposal to acquire on the entire issued and to-be-issued share capital of Dublin, Ireland-based Smurfit Kappa, which has since denied the proposal due to disagreements on the company's worth and offering price.
“Smurfit Kappa notes the announcement released by International Paper Company setting out the price of the unsolicited and highly opportunistic proposal... Shareholders are strongly advised to take no action,” Smurfit Kappa said in a statement, according to Reuters.
As stated in a recent press release, the company explained that if the transaction had been accepted and had gone through, Smurfit Kappa shareholders would have been entitled to receive €22.00 in cash and 0.3028 new International Paper shares of common stock for every Smurfit Kappa ordinary share they held.
On March 5th, International Paper’s closing share price was $58.94, according to its recent press release, and it had a € to $ exchange rate of €1 to $1.2343. With that said, the proposal values Smurfit Kappa ordinary shares at €36.46 each. Exposed in the press release, this represents a premium as approximated in the following details:
- 27.4 percent to Smurfit Kappa’s closing share price of €28.62 on 5 March 2018 (being the last business day prior to the release of the announcement)
- 28.4 percent to Smurfit Kappa’s volume weighted average share price of €28.41 since its Full Year Results on 7 February 2018
- 30.2 percent to Smurfit Kappa’s closing share price of €28.00 on 13 February 2018 (being the last business day prior to International Paper’s initial approach to Smurfit Kappa)
- 22.5 percent to Smurfit Kappa’s all-time high share price of €29.76 on 20 February 2018
Smurfit Kappa’s current issued share capital was valued at at €8.6 billion in the proposal, according to the press release, which would have provided Smurfit Kappa shareholders with a shareholding of about 15 percent in International Paper after the transaction’s completion.
According to the release, Smurfit Kappa sees the proposal as highly opportunistic. Reuters reported that Smurfit Kappa's shares rose 18 percent once the proposal was flagged on Tuesday, and another 4 percent by 0840 GMT, reaching €35.2.
On the other hand, International Paper noted that Smurfit Kappa shareholders would have been able to crystalize their holdings’ value for near-term, as well as see the transaction’s value creation. Further, the company saw that consolidation of these companies would haven created a premier global packaging powerhouse, serving customers all over the world more effectively and realizing meaningful synergies with enhanced efficiencies.
This step was calculated in that International Paper’s disciplined approach to acquisitions saw that Smurfit Kappa meets its strategic and financial criteria, which include earnings per share accretion, free cash flow generation, and a return on invested capital exceeding International Paper’s weighted average cost of capital. Taking it one step further, the company requires that it remains committed to a strong balance sheet over the long term.
Will International Paper be able to woo its European competitor with another proposal in the future, or will it seek a different acquisition to fulfil its growth pursuits? AndNowUKnow will keep you updated with the latest as the story develops.