Smurfit shareholders demand talks with bidder International Paper

A trio of leading shareholders in Ireland's Smurfit Kappa have demanded that Europe's largest cardboard box maker end its refusal to engage with International Paper and enter into negotiations with the US group that has offered nearly €9 billion to buy it.

The intervention by investors including Janus Henderson, the fund management group which is Smurfit’s third-biggest shareholder with a 4.3 per cent stake, comes as the Irish Takeover Panel has set a deadline of June 6th for IP to make a binding bid.

Dublin-based Smurfit has thus far refused to engage in discussions with Memphis-headquartered IP, the world’s biggest paper company by sales. It has tabled two takeover approaches that have been rejected.

Bid

IP has said that it is unwilling to make a hostile bid for Smurfit, which is in the FTSE 100 and trades in both Dublin and London. IP’s most recent cash-and-stock offer valued Smurfit at €25.25 in cash and 0.3028 new IP shares, or about €39.71 per share. That offer valued the Irish group at €8.9 billion not including net debt.

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"The message to Smurfit is to please either engage and get around the table with IP or give us reasons why you are not engaging," said John Bennett, head of European equities at Janus Henderson told the Financial Times.

Mr Bennett said: “We have made it clear to the advisers of IP that we have no interest supporting an offer below €40 a share. But we do have interest in demanding Smurfit’s management to come around the table and sit down to see if they can do it.”

Two other investors, representing more than 4 per cent of Smurfit’s shares, echoed those sentiments to the FT. One of them said: “Our position is that anything above €40 per share and you need to engage and work towards a deal.”

Shares in the Irish company were slightly lower on Wednesday at €34.50, while IP was down 0.5 per cent to $55.44 in New York trading.

Smurfit declined to comment. Last week Smurfit said it believed the offers from IP were “significantly below the board’s assessment of the group’s true intrinsic worth and prospects and remain significantly below the valuations set by recent industry transactions.”

In its most recent statement, US-listed IP said it would it seek a secondary listing on the London Stock Exchange as well as provide Smurfit shareholders with the option to “mix and match” the proportion of cash to stock they receive in a deal.

Battle

The takeover battle started in early March when Smurfit said it had rejected IP’s unsolicited €8.64 billion offer and dismissed the approach as “fundamentally opportunistic and conditional”.

IP made a second bid weeks later, saying it had made several fruitless attempts to engage with Smurfit and arguing that the combination of “two highly complementary businesses has compelling strategic and financial rationale”.

The Irish company is run by Tony Smurfit, son of Michael Smurfit, the octogenarian who for decades was the driving force behind the company's international expansion, and grandson of Jefferson Smurfit, its founder. Long seen as a local champion, it gained global reach long before the Irish economy took off in the 1990s.

– Copyright The Financial Times Limited 2018