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International Paper Rules Out Hostile Takeover of Smurfit

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Per Reuters, International Paper Company (IP - Free Report) has decided not to put across a hostile bid to take over its Ireland-based rival, Smurfit Kappa. The company was given time up to Jun 6 to make a binding offer for the buyout, by the Irish Takeover Panel.

In March, International Paper’s bid to take over Smurfit Kappa was rejected by the European rival citing gross undervaluation and arguing that it was better served pursuing its future as an independent company. The proposal included a cash-and-stock offer of €25.25 in cash along with 0.3 new shares of International Paper for each share of Smurfit. The previous offer valued the Irish group at €8.9 billion.

International Paper has changed its terms to offer Smurfit shareholders a "mix and match" facility that would allow them to receive a greater or lesser proportion of cash or shares.  

At the outset, the company stressed the importance of proceeding on an agreed basis. It believes that its current proposal represents a compelling strategic and financial rationale for a merger with Smurfit Kappa.  

In that context, International Paper has confirmed that it will not proceed with a binding offer unless it is recommended by Smurfit Kappa's board of directors. Also, the company confirmed that it would seek a secondary listing on the London Stock Exchange, to enable Smurfit Kappa shareholders to realize the potential value of the transaction.

However, Smurfit Kappa believes that International Paper’s latest proposal has failed to value its intrinsic business worth and it is very comfortable with the position outlined to its shareholders. International Paper suggested that the two companies should meet to discuss the potential for the combined firm.

International Paper continues to restructure itself to transform into a core packaging company. M&As remain a key strategy to strengthen its long-term business proposition.  

The company is taking initiatives to improve its operating margins over time across the business. However, over the past three months, the stock has underperformed the industry with an average loss of 6.6% compared with decline of 2.5% for the latter.

International Paper currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Domtar Corporation (UFS - Free Report) , KapStone Paper and Packaging Corporation (KS - Free Report) and Neenah, Inc. (NP - Free Report) . While Domtar and KapStone sport a Zacks Rank #1 (Strong Buy), Neenah carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Domtar has an expected long-term earnings growth rate of 5%. It has exceeded earnings estimates thrice in the trailing four quarters, with an average of 18.7%.

KapStone has an expected long-term earnings growth rate of 14%. It has exceeded earnings estimates twice in the trailing four quarters, with a beat of 12.9%.  

Neenah has an expected long-term earnings growth rate of 5%. It has exceeded earnings estimates in each of the trailing four quarters, the average being 10.7%.  

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