Staff
Monday, April 13, 2015 10:00 am

IRELAND (From The Sky News) -- A US paper-manufacturing giant is weighing a £6bn-plus takeover bid for Ireland's Smurfit Kappa as a wave of global deals fueled by cheap debt continues to gather pace.

Sky News reported that International Paper Co is working with advisers at Deutsche Bank on a possible bid for Dublin-listed Smurfit, which specializes in the production of corrugated packaging.

Shares in Smurfit rose sharply early this week amid speculation of a bid approach from either International Paper or Amcor, an Australian rival.

Sources cautioned this weekend, however, that no formal approach had yet been made to Smurfit's board by International Paper, adding that the prospective bidder may yet decide not to pursue a deal.

One City source said that the American company, which has a market capitalization of nearly $24bn (£16.4bn), had been looking at pitching an offer at about €36-a-share if it did press ahead with a proposal.

At that level, Smurfit's equity would be valued at more than £6bn, although with the company's debt and a conventional takeover premium included, a bid could be worth more than £8bn.

Smurfit's shares fell back after their initial surge last week to close at €28.91, although they are still up by more than 67% over the last 12 months.

If International Paper does lodge a bid for Smurfit Kappa, it would be the latest in a string of major takeover deals following the strongest start to a year for mergers and acquisitions for almost a decade.

In recent weeks, Heinz and Kraft Foods have agreed to merge in a $100bn (£68.3bn) deal, Royal Dutch Shell agreed to acquire BG Group in a takeover worth £47bn - the largest-ever transaction involving two London-listed companies - and the generic drug-maker Mylan offered to buy rival Perigo for $29bn (£19.8bn).

The timing of International Paper's interest is nevertheless likely to surprise analysts, some of whom played down the prospect of a bid for Smurfit earlier this week.

The Irish company's shares have soared in the last six months, while hopes of a broad economic recovery in the Eurozone, from where a significant proportion of its revenues derive, remain faint.