Based on International Paper’s closing share price of $58.94 as at 5 March 5, 2018 and a €:$ exchange rate of €1:$1.2343, the Proposal values each Smurfit Kappa ordinary share at €36.46. This represents a premium of approximately:
• 27.4% to Smurfit Kappa’s closing share price of €28.62 on March 5, 2018 (being the last business day prior to the release of the announcement).
• 28.4% to Smurfit Kappa’s volume weighted average share price of €28.41 since its full year results on Feb. 7, 2018.
• 30.2% to Smurfit Kappa’s closing share price of €28.00 on 13 February 2018 (being the last business day prior to International Paper’s initial approach to Smurfit Kappa).
• 22.5% to Smurfit Kappa’s all-time high share price of €29.76 on 20 Feb. 20, 2018.
In aggregate, the proposal values Smurfit Kappa’s current issued share capital at approximately €8.6 billion and would provide Smurfit Kappa shareholders with a shareholding of approximately 15%.
International Paper notes the comments that Smurfit Kappa believes the proposal is highly opportunistic. Given that Smurfit Kappa announced record EBITDA on Feb. 7, 2018 and recorded an all-time high share price of €29.76 on Feb. 20, 2018, International Paper does not agree with this characterization. Indeed, by submitting the Proposal after the release of Smurfit Kappa’s full year results and the medium term outlook (MTO), International Paper was able to take account of this information (and the market’s reaction to it) when making its approach.
International Paper believes that the transaction, if consummated, would be an excellent strategic fit that creates long-term value for both Smurfit Kappa and International Paper. The enlarged group would constitute a premier global packaging company that would be able to serve both local and global customers more effectively. The transaction would also create an opportunity to realize meaningful synergies through enhanced efficiencies.
On Feb. 14, 2018, International Paper approached Smurfit Kappa and requested a meeting so that International Paper could put forward a specific proposal to Smurfit Kappa. Following further communication, initiated by International Paper, a meeting was arranged on Feb. 23, 2018. At the meeting, on Feb. 23, 2018, International Paper delivered the proposal and provided a written letter to be delivered to the Smurfit Kappa board of directors.
On March 5, 2018, the proposal was rejected by the Smurfit Kappa Board. International Paper is disappointed that this was made public on March 6, 2018, prior to further engagement between the parties to discuss the value creation potential of the transaction. Nonetheless, International Paper remains ready to engage with Smurfit Kappa’s Board and shareholders to discuss both the merits of its Proposal and the reasons why International Paper believes it provides the best near and long-term value for Smurfit Kappa shareholders.