The board of Smurfit Kappa announced yesterday their rejection of what they referred to as a ”fundamentally opportunistic and conditional” takeover bid from US-based International Paper. Europe’s largest producer of cardboard-boxes has, however, been more recently linked with a willingness to negotiate an improved bid if International Paper decide to raise their offer.

A spokesperson for Smurfit Kappa indicated that if International Paper was to return with a bid that was more in the region of 40-euros-a-share, an increase on the original 33-euros-a-share, then negotiations may be reconvened. Smurfit Kappa would evaluate any credible offers based on individual merits, although the spokesperson was quick to reiterate that the initial proposal from International Paper represented a valuation that failed to recognise recent company deals and the business strategy in place. The spokesperson has declined to reveal their identity as Smurfit Kappa are yet to go public with their position.

Dublin-based company, Smurfit Kappa, is a world leading producer of paper-based packaging with around 46,000 employees across 35 countries and sales of €8.6 billion in 2017. The company has around 18 percent of the European cardboard packaging market in addition to a smaller Pan-American presence, including operations in Brazil, Mexico and Columbia. FactSet data estimates Smurfit Kappa’s enterprise value at €9.8 billion.

Smurfit Kappa recently announced record EBITDA for 2017 of €1,240 million and a full year ROCE of 15 percent, and the underlying positive trading conditions have continued into 2018. As part of its year end results, Smurfit Kappa announced an acceleration of its investment programme based on plans to improve its market position and strengthen its integrated model between 2018 and 2021.

International Paper is one of the world’s leading producers of fiber-based packaging, pulp and paper. The company is three times the size of Smurfit Kappa by market capitalization, boasting almost a third of the US market as well as 4 percent of the European market, with mills in Italy and Spain. 

Smurfit Kappa Chariman, Liam O’Mahony, said of the original bid: “The board of Smurfit Kappa has unanimously rejected this unsolicited and highly opportunistic proposal. It does not reflect the group’s true intrinsic business worth or its prospects.”

He added that the company had a “proven management team which we believe will deliver significantly greater value for shareholders on a standalone basis.”

Speaking to The Financial Times, Mr. Smurfit, grandson of the company founder, commented: “There is a lot of momentum in our business. International Paper have been opportunistic in trying to get in before a lot of our plans are developing.”

There has been no immediate comment or reaction from International Paper to the rejected bid.

Speculators have suggested that an agreement could be reached given the strategic ambitions of both companies. Justin Jefferies, analyst in London, has highlighted the “strategic value of Smurfit Kappa and potential synergies with existing International Paper operations.” Meanwhile, David O’Brien, head of industrials research at Goodbody in Dublin, says that an acquisition makes strategic sense “given complementary businesses in Latin America and the opportunity for International Paper to build on what is its small position in Europe”.