(Bloomberg) -- Smurfit Kappa Group Plc would consider holding talks with International Paper Co. if the U.S. packaging giant raises its offer for the Irish company, according to two people familiar with the matter.
The Dublin-based maker of cardboard boxes and paper bags on Tuesday rejected International Paper's 8.6 billion euros ($10.7 billion) bid, saying the 36.46-euro cash-and-shares proposal “fails entirely” to reflect its growth prospects. The shares increased by a record, and extended the gain by as much as 6 percent Wednesday.
Smurfit will engage with International Paper if it returns with an acceptable offer above 40 euros-a-share, said one of the people, who asked not to be identified as the company's position isn't public.
Smurfit would evaluate any credible offer on its merits, a spokesman said, while reiterating that the initial proposal doesn't reflect the company's prospects and represents a valuation below recent comparable deals. International Paper declined to comment.
The stock gained 6.3 percent to 36 euros in Dublin, valuing the company at 8.5 billion euros. International Paper dropped 4.7 percent to $55 in New York.
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A second offer of between 40 euros and 43 euros per share would equate to the valuation that WestRock Co. paid for Kapstone Paper & Packaging in a $3.4 billion deal earlier this year, said Gerard Moore, an analyst with Investec Plc. in Dublin.
International Paper makes one in three cardboard boxes in the U.S. and a purchase of Smurfit would see it take over the No. 1 producer in Europe. The offer is “fundamentally opportunistic” and “significantly undervalues” the group, the Irish company said Tuesday. Smurfit plans about 1.6 billion euros in capital investment and is committed to steady acceleration of dividend payments, it said.
--With assistance from Dara Doyle
To contact the reporters on this story: Peter Flanagan in Dublin at pflanagan23@bloomberg.net, Dinesh Nair in London at dnair5@bloomberg.net.
To contact the editors responsible for this story: Ambereen Choudhury at achoudhury@bloomberg.net, Aaron Kirchfeld at akirchfeld@bloomberg.net, John Bowker, Simon Casey
©2018 Bloomberg L.P.
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