The corrugated sector received a jolt yesterday with reports that International Paper was mulling over a £6bn bid for Smurfit Kappa.
With both parties remaining tight lipped on the reports, we can only speculate on what such a deal means for the two companies and for the corrugted sector. But what is clear is that the packaging industry continues to consolidate and US firms are keen to gain a bigger presence in Europe.
As it stands, Smurfit Kappa hasn’t received a bid from US-based International Paper; it’s speculation at the moment. But if the deal were to materialise, then it would make a certain degree of sense from International Paper’s perspective.
The company is big in graphical paper and with commercial print volumes on the wane a push into the ever-growing corrugated market must be tempting. From bog standard brown boxes to innovative shelf-ready packs, the sector appears to be a solid long term bet.
And then there’s the geographical angle. US companies have been busy snapping up UK and Irish-based packaging suppliers. From cartons to metals, a strong presence in Europe appears to be a key part of any major company’s strategy. The UK and Ireland makes sense as a European base, as there are cultural similarities on both sides of the Atlantic.
What’s also interesting is the reported size of the potential deal – nearly £6bn. This follows hot on the heels of another major bid – Ball Corporation’s £4.4bn deal for rival metals company Rexam. Packaging is valued and attracting an unprecedented amount of interest from private equity houses.
It would be surprising if further consolidation wasn’t set to materialise in 2015. Some might view it as a good thing – a pool of strong companies supplying the sector. Others might not be so enthusiastic – a diminishing number of players restricting choice for packaging buyers.
Whatever direction the Smurfit Kappa/International Paper saga takes, don’t expect it to be the end of the mega deals and takeover speculation in 2015.
