logo-loader

Smurfit Kappa rejects revised bid from International Paper

Published: 19:20 26 Mar 2018 AEDT

No sale
The revised proposal "fundamentally undervalues the group and remains significantly below the valuations set by recent industry transactions"

Smurfit Kappa Group PLC (LON:SKG) has received a revised proposal from International Paper Co (NYSE:IP) and chucked that one in the bin also.

The Dublin-headquartered paper & packaging firm rejected the initial takeover bid from its US rival, describing it as “unsolicited and highly opportunistic” and the rhetoric has not changed much in response to the revised offer, which the Smurfit board said fails to reflect the group’s intrinsic value, track record and superior prospects.

READ: Smurfit Kappa surges after rejecting "unsolicited and highly opportunistic" takeover offer from International Paper​

The latest proposal from International Paper (IP) is on the basis of €25.25 and 0.3028 IP shares for each Smurfit Kappa share.

The terms value each Smurfit share at around €37.54, which is roughly 3,283p; the previous offer valued each Smurfit share at €36.46.

Shares in the FTSE 100 firm slipped 92p to 2,966p on the rejection of the offer.

“On 6 March, the board of Smurfit Kappa unanimously rejected International Paper’s unsolicited and highly opportunistic proposal. The revised proposal does not offer Smurfit Kappa shareholders much more than compensation for the fall in International Paper’s share price since that date and again entirely fails to value the group’s true intrinsic business worth and future prospects,” said Liam O’Mahony, the chairman of Smurfit Kappa.

“We delivered a record performance in 2017 and underlying trading momentum has continued into 2018. Moreover, the revised proposal does not make strategic sense for Smurfit Kappa and its stakeholders. Smurfit Kappa has a distinct business model and culture as a customer-oriented, performance-led packaging leader and has already communicated a strong plan to accelerate development and performance with its 2017 year-end results,” O’Mahony continued.

“The board unanimously reaffirms its belief that it is in the best interests of the group’s stakeholders for Smurfit Kappa to pursue its future as an independent company, headquartered in Ireland, operating as the European and Pan-American leader in paper-based packaging,” O’Mahony concluded.

Some concern among SKG holders

Mike van Dulken, the head of research at spread betting firm Accendo Markets, noted that the shares were sitting at the bottom of the FTSE 100 leader-board this morning after the bid rejection.

“Today’s reaction suggests concern among SKG holders (sitting on still handsome 20% profits vs 2018’s average) that IP’s new 15% higher cash component is merely aimed at offsetting the now lower valued share component, and that the meagre 3% boost to the aggregate offer means it is unprepared to go much if any higher. The other worry is that SKG will continue to hold out for improved terms which may never materialise. In which case, shareholders are cashing out as close to the top as they can,” van Dulken said.

“Those hanging on may be expecting a second revision from IP before it gives up, and history tells us this could well happen. The second bid does, after all, show willingness to maintain the bid’s 67% cash value to SKG shareholders; however, given SKG’s second rejection, and unless any third offer is for something closer to recent record highs (10% higher), it may not prove enough to convince management and shareholders alike to agree to tender, especially given the risk that the value of the 32% share component worsens further, assuming the deal requires at least some anti-trust approval,” he concluded.

Australian Strategic Materials signs US$600 million LoI

Rowena Smith, CEO and managing director of Australian Strategic Materials Ltd (ASX:ASM, OTC:ASMMF), joins Jonathan Jackson in the Proactive studio to discuss the company’ s Dubbo Project, in Central West New South Wales. This project aims to extract and process critical minerals and rare earth...

6 hours, 11 minutes ago