Brazilian pulp and paper company Suzano has contacted U.S.-based International Paper to express interest in an all-cash acquisition that would be worth nearly $15 billion, according to people familiar with the matter.
The move comes less than a month after International Paper agreed to buy British packaging company DS Smith for $7.2 billion, beating a rival bid from London-listed Mondi. This transaction, which is expected to close by the fourth quarter of 2024, could be disrupted if Suzano pursues its bid to purchase Memphis-based International Paper.
Suzano has verbally communicated her $42 per share offer to International Paper’s board and could submit a formal offer in the coming days, according to the sources, who spoke on condition of anonymity. International Paper is preparing to reject Suzano’s offer as insufficient, one of the sources said.
Shares of International Paper jumped 12% on the news, before paring gains earlier on Tuesday, giving the company a market capitalization of around $13.5 billion. dollars. Its shares closed up more than 5%.
Shares of Suzano, which has a market value of 77.6 billion reais ($15.33 billion), closed down more than 12% in Brazil. Shares in DS Smith in London fell 7.3% before erasing most of those losses to close down around 1%.
Suzano, the world’s largest pulp maker, is in talks to secure debt financing to support its bid, and has informed International Paper that the bid would be contingent on the latter abandoning its agreement with DS Smith, the sources said.
International Paper declined to comment on Suzano’s approach, saying the company continued to focus on closing its deal with DS Smith.
“The IP team, led by new CEO Andy Silvernail, implements business strategies and pursues business and cost improvement initiatives across the portfolio to achieve best-in-class profit margins and significant earnings growth. Additionally, as industry conditions continue to improve, IP will emerge from a cyclical earnings trough,” International Paper said in a statement.
Suzano declined to comment.
The packaging industry has benefited from a surge in demand during the COVID-19 pandemic as consumers placed more orders through e-commerce sites during worldwide factory shutdowns . But when e-commerce growth returned to more normal levels after lockdowns were lifted, the sector turned to deal-making to maintain growth.
Last year, Irish company Smurfit Kappa agreed to merge with US company WestRock in a deal worth $20 billion.
International Paper said last month that its tie-up with DS Smith would enable it to expand its presence in Europe and generate annual pre-tax synergies of at least $514 million. The merger with International Paper would allow Suzano to expand in the packaging sector.
Suzano is in the midst of a CEO transition. It chose Joao Alberto Fernandez de Abreu, the former head of rail operator Rumo, as its new CEO to replace Walter Schalka, who led the company for 11 years.
In February, Suzano reported a 39% fall in fourth-quarter net profit from a year earlier as falling pulp prices weighed on revenue.
($1 = 5.0758 reais) (Reporting by Anirban Sen in New York; additional reporting by Alberto Alerigi Jr. and Peter Siqueira in Sao Paulo; Editing by Will Dunham)
