It's been 18 days since cardboard box-maker Smurfit Kappa revealed it had received and rejected as "highly opportunistic" a €36.46 per-share takeover bid, which valued the group at €8.6 billion. And we haven't heard from its US suitor, International Paper, since it hinted the same day that it may come back with a sweetened offer.
Shares in the Dublin-based group, which soared on news of the approach, have since fallen back by as much as 7 per cent to €33.78 as investors have started to get jittery – especially as parties close to Smurfit Kappa had let it be known it wouldn't consider allowing its would-be Memphis beau peek at its books unless it came back with an offer of at least €40 a share.
International Paper’s share price has slumped by 12 per cent in the same period, as its own investors gave the prospect of a tie-up a less than warm response. This has effectively seen the value of its stock-and-cash bid fall below €35 a share.
Two institutional shareholders in Smurfit Kappa told The Irish Times this week they would be willing to sell out below the €40 red line set out by FTSE 100-listed Smurfit Kappa – with one putting a range of between €38 and €39.
Hostile attitude
You can be sure that others are making similar views known to the group's chief executive of three years, Tony Smurfit, the only remaining member of packaging dynasty in the business, and his chairman, Liam O'Mahony.
Other market sources said the company should at least drop its hitherto hostile attitude to International Paper and start discussions if the US group came back with a revised bid – with reports suggesting that the US company could raise the cash element of its indicative offer to €26 a share from €22 without jeopardising its credit ratings.
Certainly, the word in the market is that International Paper’s advisers have spent much of the hiatus since the last public statements earlier this month soliciting feedback from investors on where it should pitch a fresh bid.
While Smurfit Kappa's chief financial officer, Ken Bowles, said earlier this month that many of the company's European investors would not want to be left with shares in a US company as a result of the merger, there has been talk in recent days that International Paper could opt for a dual listing of its stock in New York and London to get a deal over the line.
Sense of unease
A spokesman for International Paper declined to comment when this was put to him on Thursday.
Either way, there is a growing sense of unease among investors that if Smurfit Kappa does not play ball with International Paper should it come back with an improved bid, the stock will slide back below €29, to levels it was changing hands at before news broke of the first approach.
Smurfit and O’Mahony would face some testy exchanges from shareholders at the company’s annual general meeting in six weeks’ time if that were to happen – especially as there don’t appear to be any rival white knight suitors on the horizon.
Why home buyers should keep eye on little-known acronym
It's hard to get excited about an announcement that has been coming out from the Central Bank every three months in recent times on "countercyclical capital buffers". But would-be mortgage borrowers should keep an eye on the evolving language in these statements.
Central banks and financial regulators across the European Union have been obliged since the start of 2016 to make lenders set aside additional capital when they judge that credit growth is becoming excessive. These countercyclical capital buffers – or CCyBs, as they are usually referred to by regulatory wonks – are part of a raft of new rules designed to avoid a future financial crisis.
The latest CCyB announcement from Ireland’s Central Bank this week, that it will continue to set the rate at zero for the next three months, is of no surprise. Credit growth has only recently returned in the State, following years of contraction as borrowers repaid loans at a faster pace than they took on new debt, and banks wrote off billions of euro of soured debt.
However, the regulator injected an interesting line in its latest statement, saying that the "timing of potential tightening of the CCyB will warrant careful consideration" as the lending environment continues to strengthen in Ireland "in the context of robust growth in the domestic economy and asset prices".
Anyone looking for clues as to when the Central Bank might tighten the State’s mortgage-lending rules is likely to see an advance warning in a move on the CCyB rate first.
