Smurfit deal given 20% chance amid impasse as deadline looms

The chances of US group International Paper (IP) wrapping up a takeover deal with Smurfit Kappa are fading, as both sides maintain a standoff days before a bid deadline.

Sources familiar with the matter said that neither side has engaged with the other since the Irish Takeover Panel moved in the middle of last month to set a deadline of 7am on June 6th for IP to announce a binding offer for Smurfit Kappa or face a 12-month ban from being able to mount another approach.

The company said it would only proceed with such an offer once it was recommended by the board of its Irish rival.

Chris Manuel, an analyst with US bank Wells Fargo, said on Friday that he now puts the probability of a deal at less than 20 per cent, based on his conversations with Smurfit Kappa investors, public comments from both sides and IP's steadfast position that it will remain disciplined.

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Smurfit Kappa rejected proposals from IP in February and March for failing to value its “intrinsic business worth and future prospects”. The second bid valued the Dublin-based cardboard box-maker’s stock at €36.90 at the time, excluding a final dividend which was paid out in early May.

However, a subsequent increase in IP’s share price and surge in the value of the dollar against the euro have seen the value of that offer increase to €38.80 as of the close of European trading on Friday.

Mr Manuel said that IP shareholders would gain some comfort once the June 6th bid deadline passes without a deal. Market sources said, however, the Smurfit Kappa’s stock is likely to fall in such a scenario, which could lead to uncomfortable conversations with a number of shareholders.

Shares in Smurfit Kappa had spiked on Monday amid renewed hopes that IP would make a third takeover approach, emboldened as the Irish group came under public pressure from a top-three shareholder to engage with its unwanted suitor.

UK asset manager Janus Henderson, which owns 4.3 per cent of Smurfit Kappa, had hinted that it could call for an extraordinary general meeting to propose the removal of company directors if it breached the 5 per cent level. Market sources said at the time shareholders behind almost a further 20 per cent of the stock had indicated to Janus Henderson that they were supportive of the firm's position in seeking to get both sides to the table.

However, Janus Henderson fund manager John Bennett had made it clear that he would not support an offer below €40 per Smurfit Kappa share.