According to a report from Reuters last week, Suzano could be set to acquire International Paper for almost $15 billion – a deal that could disrupt IP’s own plans to acquire DS Smith. In this article, Packaging Europe’s brand director, Tim Sykes, tells us everything we need to know about this news.
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The saga continues. Following months of speculation, a number of different announcements, and enough sub-plots and side characters to fill an episode of Game of Thrones, the DS Smith acquisition story has had yet another twist.
According to a recent report from Reuters, International Paper – which had been involved in an ongoing bid to acquire DS Smith – is itself potentially being acquired by Suzano.
The report, which cites anonymous sources, states that Suzano “has informed International Paper that the offer would be conditional on the latter abandoning its deal with DS Smith.”
How did we get here, and how might this news develop in the coming weeks and months?
The story up to now
If you cast your mind back to February of this year, you might recall that Mondi was actually the first company to express an interest in buying DS Smith – a potential merger that was expected to yield a combined value exceeding €11.5 billion.
The deal had its supporters, who argued that a merger between Mondi and DS Smith could result in a European ‘industry leader’ for paper packaging solutions, and its detractors, who predicted that conflicting desires between the companies’ shareholders could cause the agreement to fall below the ideal intrinsic value price target.
Then, in late March, a bidding war was sparked when International Paper waded in with an offer of almost €6 billion. In mid-April, this deal seemed set to go ahead. An agreement between the companies for a “recommended all-share combination” was announced, which was expected to close by Q4 2024.
And that’s where things stood, until the bombshell Reuters report went live.
Where are we at now?
In response to this news, the markets had their say: Suzano’s share price dropped by around 11% in the days after, while International Paper’s increased by a similar amount over the same timeframe.
Analysts and commentators had mixed opinions. Philip Ng of Jefferies commented: “It’s hard for us to imagine IP would look to sell to Suzano unless the offer was significantly upsized from here, which Suzano does not appear to have the balance sheet [for]”
Meanwhile, Itaú BBA, a Brazilian financial services company, commented: “A potential deal with IP would be aligned with Suzano’s recent speech, as the company has been vocal about considering M&A expansions in the paper business in North America and Europe as potential growth avenues.”
Suzano, for what it’s worth, commented that it has not signed an agreement with International Paper for a potential business combination; nor has its management made any decision regarding a potential deal.
Expect to read plenty more news and analysis on this story from us, as it develops – because one thing is for certain: it won’t be ending any time soon.
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