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Smurfit Kappa surges after rejecting "unsolicited and highly opportunistic" takeover offer from International Paper

The FTSE 100-listed packaging group said it believes the offer does not reflect its worth nor its prospects and would involve its shareholders receiving "a high proportion" of their consideration in International Paper shares
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The Dublin-headquartered firm added: “The Proposal fails entirely to reflect the Group’s strong growth prospects and attractive industry outlook”

Smurfit Kappa Group PLC (LON:SKG) was one of the market's top gainers on Tuesday, jumping 18% after revealing that it has rejected an "unsolicited and highly opportunistic" takeover offer from International Paper Co. (NYSE:IP) comprising cash and a minority holding in an enlarged business.

The FTSE 100-listed packaging group said it believes the offer does not reflect its worth nor its prospects and would involve its shareholders receiving "a high proportion" of their consideration in International Paper shares.

READ: Higher raw material costs and FX headwinds weigh on Smurfit Kappa’s full-year profits

The Dublin-headquartered firm added: “The Proposal fails entirely to reflect the Group’s strong growth prospects and attractive industry outlook”.

Smurfit Kappa’s chairman Liam O'Mahony said: "The board of Smurfit Kappa has unanimously rejected this unsolicited and highly opportunistic proposal. It does not reflect the group's true intrinsic business worth or its prospects.

“We delivered a record performance in 2017 and underlying trading momentum has continued into 2018. The group has a proven management team which we believe will deliver significantly greater value for shareholders on a stand-alone basis."

He added: "The board believes that it is in the best interests of all stakeholders for the group to pursue its future as an independent company, headquartered in Ireland, operating as the European and pan-American leader in paper-based packaging. We strongly advise shareholders to take no action."

The company did not provide any details surrounding the value of the takeover offer.

Last month, the Irish company -  Europe’s largest producer of paper-based packaging - posted underlying earnings (EBITDA) of €1.24bn for 2017.

Packaging shares leap

In early morning trading, Smurfit Kappa shares were 18% higher at 3,010p.

Mike van Dulken, head of research at Accendo Markets, commented: “The news has understandably sent SKG shares sharply higher, +20% to fresh record highs, and dragged sector peers Mondi and DS Smith (SMDS) north by 4-5%.

“This is based on hopes of consolidation in the packaging sector, one which may not top investors’ list of the most exciting stocks but which has, nonetheless, offered significant share price gains since the 2009 financial crisis lows (DS Smith shares up 15x, Mondi up 16.7x, SKG up 37.5x), helped by the meteoric rise of internet shopping (and economic recovery) requiring each of the packagers’ wares to ensure the protection of goods during transit, and eclipsing many other blue-chip giants.”

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