Smurfit Kappa unlikely to see fresh IP approach in near term, Exane says

Year-long ban on making fresh bid ran out last month

Much of the declines of Smurfit Kappa and IP have been down to concerns over box demand and declining prices across the industry. Photograph: Luke MacGregor/Bloomberg

Much of the declines of Smurfit Kappa and IP have been down to concerns over box demand and declining prices across the industry. Photograph: Luke MacGregor/Bloomberg

 

Cardboard box-maker Smurfit Kappa, which saw off an unwanted takeover bid from International Paper (IP) last year, is unlikely to court renewed interest from its US rival in the near term, according to analysts at French brokerage Exane BNP Paribas.

A 12-month ban on making a fresh bid – under Irish takeover rules – ran out last month, a year after IP abandoned a cash-and-stock bid that was worth as much as €9 billion at one stage.

“Whilst IP can now re-bid from June 2019, we view this as unlikely in the near term given IP’s [stock price decline in recent times] on falling US box demand,” said Exane BNP Paribas analysts Justin Jordan and Julien Ouaddour in a report published on Tuesday. However, they said that another merger attempt is “possible on a 3-5 year view”.

Both Smurfit Kappa and IP have seen their share prices fall by almost 25 per cent since the Memphis-based group decided against making a formal offer 13 months ago, citing lack of engagement by the Irish group’s board and management.

Much of the declines have been down to concerns over box demand and declining prices across the industry.

Outperform

However, the Exane BNP Paribas have moved to upgrade their stance on Smurfit Kappa’s stock to outperform, the equivalent of a buy recommendation, from neutral, saying that containerboard prices are stabilising and that demand for packaging could improve in the second half of the year.

In addition, the analysts said: “We think investors do not fully appreciate how SKG’s medium-term investment plan can improve its business resilience.” Smurfit Kappa said in early 2018 that it aims to spend €1.6 billion expanding its operations and buying rivals over the space of four years.

Its largest deal of 2018 was the purchase of Dutch company Reparenco for €466 million. This was followed up by smaller purchases in France, Bulgaria and Serbia.

Shares in Smurfit Kappa rose as much as 1.2 per cent in early trading in Dublin on Tuesday to €27.86.