Brazilian paper giant Suzano(NYSE: SUZ) has reportedly approached U.S. rival International Paper(NYSE: IP) about an all-cash $15 billion takeover. Shares of IP jumped 11.9% higher when the report surfaced, only to fall back to up 5% in the final hour of trading on Tuesday.
Could International Paper go from buyer to seller?
There's been a wave of consolidation in the paper and packaging industry. Last year, Smurfit Kappa Group agreed to acquire WestRock for $11.2 billion, and Mondi and International Paper engaged in a bidding war for DS Smith.
Suzano is apparently prepared to get into the act. Reuters reported that the company has approached International Paper about a potential deal with an offer that would represent a premium of about 14% over the company's Monday closing price.
The report says that a deal would require International Paper to abandon its pursuit of DS Smith. The company is likely to reject the Suzano offer as inadequate, the report said, though the Brazilian company could return with a higher bid.
Is International Paper a buy on the merger talk?
Talk of an International Paper takeover is speculative, at best. It isn't clear whether Suzano would be willing to meet whatever price the company's board would deem adequate. And it's uncertain if an iconic American manufacturing name would be allowed to be sold to an international buyer, especially in an election year.
Still, this is a consolidating industry, and International Paper has a big role in how the sector will evolve. Investors shouldn't buy in just hoping that the takeover speculation turns into a firm offer, but it's interesting to see key players in the industry see value in International Paper well above the pre-merger speculation trading price.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends DS Smith. The Motley Fool has a disclosure policy.
