Amcor is rumoured to be one of two giants considering a takeover bid of around AU$11.6bn (£6bn) for Europe’s largest paper-packaging supplier, Smurfit Kappa.
International Paper, the largest pulp and paper company in the world, is widely thought to be the other.
Smurfit Kappa, whose head office is in Dublin and is also listed in London, specialises in corrugated paper-based packaging and had revenues of AU$11.2bn (£5.8bn) in 2014. International Paper has a market capitalisation of nearly AU$31.7bn (£16.4bn).
Smurfit Kappa was founded in 1934 as Jefferson Smurfit. It had one packaging plant in Dublin. In 1964, it floated on the Irish Stock Exchange. In 202, it was taken private in a management buyout by US private equity firm, Madison Dearborn Partners.
And in 2005, it merged with Kappa Packaging and the combined business floated on the Irish Stock Exchange in 2007.
This began to be problematic immediately. It had been left with high leverage and its shares fell from €20 in 2007 to less than €1 in 2008. Since then, it has repaid €1.2billion of debt, has gearing of 70% and its shares have recovered to about €16.65.
The company has 350 plants in 32 countries in Europe, Central and South America and the US, employing 41,000 workers it also has 20% of the paper packaging market in Europe, ahead of its rivals, DS Smith and Mondi.
But late last year, it was still fighting to conquer its challenges. Chief executive, Gary McGann, told The Telegraph UK in November, “We’re at a discount to our competitors at the moment. Our market multiple is lower than both Mondi and DS Smith for reasons that are not altogether clear. I think it’s a hangover from the days when we were heavily geared.”
Two weeks ago, International Paper also announced that it will invest AU$176m (US$135m) to convert a mill in North Carolina to produce the softwood pulp and fluff used in nappies and feminine hygiene products. When the conversion is complete, the company will have the capability to produce up to 1.4 million tons annually of high-quality fluff. This will most likely happen by mid-2016.
