The board of Smurfit Kappa says it believes it has superior prospects as a standalone company as US rival International Paper confirmed that it was not proceeding with a third bid for the packaging firm. Two previous bids were rejected by the board. IP had until 7am today to make a new bid but it said it was out due to a lack of engagement from Smurfit Kappa.
David O'Brien, paper and packaging industry analyst with Goodbody Stockbrokers, said it was not a huge surprise as speculation had mounted in recent days that a bid was unlikely by this morning. "They said it was down to a lack of engagement from Smurfit Kappa. International Paper is now precluded from making another bid for the next 12 months, unless there are extenuating circumstances, such as another company coming in with a bid or Smurfit Kappa engaging of its own accord," Mr O'Brien said.
The analyst said that Smurfit Kappa was likely to continue as an independent company given its size. International Paper was the only realistic suitor and a merger would have made some strategic sense. "IP is one of the few companies that could have made a tilt at Smurfit Kappa given its size. If you look at the geographic split, they make a complementary fit. However, it was complicated by a feeling that the cultures at the companies don't match. IP is more engineering focused while Smurfit Kappa is more commercial," he said.
David O'Brien said there could be some continued volatility in the stock price of Smurfit Kappa in the days ahead. "When processes like this come to an end, there's invariably some volatility. The share price was down 7% on Monday but it was up 1.5% yesterday (in London). For Smurfit Kappa, given how strong the industry dynamics are, they don't see a huge amount of downside over the next few weeks," he concluded.
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