International Paper refuses to crumple at egm threshold move

International Paper (IP) successfully defeated a pesky investor proposal at its recent annual general meeting that the company should lower the threshold at which shareholders could call an extraordinary general meeting (egm).

Some 55 per cent of shareholders backed IP's chief executive, Mark Sutton, in slapping down the proposal that an egm be held if holders of at least 10 per cent of its stock sought one. It's left the threshold at 20 per cent.

Happily for Sutton, shareholder rights are a bit stronger in Smurfit Kappa, where investors holding 5 per cent of a stock can call for an egm. And there's a growing belief that major UK investor Janus Henderson will seek to do just that if Smurfit Kappa refuses to properly engage with IP on a potential merger ahead of a bid deadline next week.

Janus holds 4.2 per cent of Smurfit Kappa’s stock, but it wouldn’t take much to get it over 5 per cent – especially in the likely event that the shares fall back if IP walks away.

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Smurfit Kappa

News that holders of almost an additional 20 per cent of Smurfit Kappa’s stock are supportive of Janus Henderson suggests that the asset manger won’t have too much trouble getting support if it sought an egm to remove directors from the Irish paper packaging group’s board.

Shareholders in Smurfit Kappa aren't willing to sell at any price. It's been clear for some time that a bid below €40 per share will not get much backing. But investors have been frustrated at the refusal of chairman Liam O'Mahony and chief executive Tony Smurfit to talk to Sutton.

The current value of IP’s most recent stock-and-cash proposal, made in March, is almost €38.60.

IP has made it clear that it is not prepared to go hostile. The company has said privately to Smurfit Kappa shareholders that this reflects a fear that such a move would be negative signal for the Irish company’s workforce, management and, ultimately, the integration of both groups.

But given the level of hostility between both sides to date, it would be hard to see many top Smurfit Kappa executives sticking around if the unwanted suitor wins out.