Package deal: Suzano raises bid for International Paper
Happy Friday!
This week, David French and I teamed up to report the latest state of play on what could be one of the biggest mergers in the world of paper and packaging. A few days after our scoop, Suzano put out a statement confirming its talks with International Paper, without sharing specific details on its bid.
Suzano has been in talks with its advisers about sweetening its $15 billion acquisition offer for International Paper. Reuters reported earlier this month that Suzano had approached International Paper to verbally express interest in an all-cash acquisition that was worth roughly $42 per share. Such a deal is conditional on International Paper abandoning its agreement to acquire British packaging firm DS Smith for $7.2 billion.
International Paper rejected Suzano's initial approach, and Suzano is discussing raising its offer by a few dollars per share.
Suzano's acquisition overtures risk disrupting International Paper's campaign to convince its shareholders to back the DS Smith deal. International Paper will set a date soon for its shareholders to vote on the DS Smith transaction.
Earlier in May, Suzano's outgoing Chief Executive Walter Schalka said the company's management "will not do anything that could put the company at risk", without commenting on its talks with International Paper.
Both Suzano and International Paper are in the middle of leadership transitions. Suzano has tapped Joao Alberto Fernandez de Abreu, the former head of rail operator Rumo, as its new CEO to replace Schalka, who has led the company for 11 years. IP recently appointed Andrew Silvernail as its new CEO, with Mark Sutton taking on the role of chairman.
Suzano's interest in International Paper comes at a time when the global packaging industry is consolidating. Last year, Ireland-based Smurfit Kappa agreed to combine with U.S.-based WestRock in a deal worth $20 billion.
BACKGROUND ON SUZANO
Suzano Group started out as a commercial enterprise that was founded by Brazilian businessman Leon Feffer, who immigrated to Brazil from Ukraine. Leon’s son Max Feffer managed Suzano briefly following his death in 1999. Max Feffer died a few years later in 2001 and David Feffer, Leon’s grandson, took over the family-run business.
Daniel Feffer, David’s brother, serves on the Suzano board alongside David. Suzano Holdings and the brothers control roughly 43% of Suzano’s share capital between them – including related third-party shareholders, the combined stake goes up to nearly 48% of the total share capital.
Through the 20th century, Suzano grew as a paper manufacturer and expanded into pulp production in the 1950s. Suzano, which has in the past pursued big acquisitions to fuel its expansion, agreed to buy Fibria for $7.5 billion in 2019 - a deal that created Brazil’s largest paper producer. It also acquired Kimberly-Clark’s local tissue business for $175 million in 2013 - a deal that made the company the leading toilet paper maker in Brazil.
Over the years, Suzano has expanded into new segments such as absorbent materials for sanitary products. The company also controls Premesa SA which operates in industries such as real estate, steel and aluminum.
As analysts have noted, a potential Suzano-IP tie-up makes a lot of strategic sense. If the talks are successful and a deal is signed, the transaction is not expected to face any major regulatory hurdles or complicated shareholder votes, given that Suzano is family-controlled. The biggest question mark is Suzano’s leverage and whether that becomes an impediment in the company securing meaningful engagement from IP. Watch this space for more in the coming weeks.
Elsewhere, Milana Vinn put together a timely analysis on how Google parent Alphabet's potential acquisition of HubSpot, a U.S. marketing software maker with a market value of $31 billion, would boost its ability to compete against Microsoft in offering cloud-based applications to companies.
Reuters reported last month that Google was exploring an offer for HubSpot. Such a deal would be Google's biggest, expanding its products and applications that serve businesses.
Google is already challenging the dominance of Microsoft's Office platform through its Google Workspace collaboration offerings. Buying HubSpot would make Google a competitor in the so-called customer relationship management sector, which Microsoft caters to with its Dynamics 365 products, said Cowen analyst Derrick Wood.
HubSpot, which makes marketing software for small and medium-sized businesses, is seeking ways to maintain sales growth in the face of a wider economic slowdown.
HubSpot CEO Yamini Rangan said on the company's first-quarter earnings call this month that client demand had weakened, as small businesses fret about the economic impact of high interest rates.
HubSpot has maintained growth despite clients downsizing, reporting a 23% rise in sales and 15% operating margin in the first quarter. However, equity analysts have warned that its shares would have taken a hit were it not for Google's acquisition interest.
Most analysts covering HubSpot lowered their price target on the stock following its latest earnings report. Some have warned that the company's niche in serving smaller businesses, which sets it apart from bigger enterprise competitors such as Salesforce and Oracle, could become a weakness if a downturn makes financing harder to secure for those clients.
HubSpot specializes in so-called "inbound marketing," in which the consumer initiates engagement with a brand. HubSpot clients use its software to produce advertising content that consumers click on online or follow up on.
Inbound marketing largely relies on search engines and social media to attract customers and convert them into leads, offering many synergies with Google, whose parent Alphabet also owns popular video streaming service YouTube.
While Microsoft has focused on attracting big corporate customers, Google has sought to also appeal to smaller companies, which make up the bulk of HubSpot's client base.
Acquiring HubSpot would deliver Google a trove of valuable sales leads, filling a gap as it removes tracking applications known as "cookies" from its Chrome browser in the second half of 2024, said Stifel analyst Parker Lane.
And finally, Amy-Jo Crowley scooped that Peter Hargreaves, the biggest shareholder in UK retail investment platform Hargreaves Lansdown, is open to taking the company private and has held talks with investors recently about a transaction.
Hargreaves Lansdown said on Thursday it rejected a 4.67 billion pound ($5.95 billion) takeover proposal from a consortium led by CVC Advisers and the Abu Dhabi Investment Authority, saying it "substantially" undervalued its prospects.
The approach from the consortium proposed a price of 985 pence a share. Hargreaves, co-founder of Hargreaves Lansdown, wants to hold on to his about 19.8% stake and would prefer a take private at a higher price.
He has in the last two years been considering options for his stake, including taking the company private. He is the largest shareholder with a 19.78% stake, based on LSEG data. Hargreaves Lansdown has a market capitalisation of 4.64 billion pounds ($5.91 billion).
Recommended by LinkedIn
Hargreaves Lansdown is the latest London-listed company to become a takeover target as analysts note an uptick in M&A activity in the UK.
The company was founded in 1981 by Hargreaves and Stephen Lansdown and listed in London in 2007 but has in the last few years seen its stock languish.
And here’s the best of the rest from the Reuters corporate finance file this past week:
Saudi Arabia is planning a multi-billion-dollar share sale in energy giant Aramco as soon as June in what would be one of the region's biggest stock deals, two people familiar with the matter said.
What more can BHP boss Mike Henry do in seven days to seal a deal with Anglo American that he hasn't already tried during his month-long campaign? That's the extra time his quarry on Wednesday secured from the UK Takeover Panel for him to make a revised and formal offer - while rejecting his latest proposal valuing Anglo at $46 billion. With Henry calling the increased share ratio on the table "final", he would, on the face of it, seem to have little chance of success. The trick is to convince his target that its own breakup plan is more risky than his three-step approach.
Swiss private bank Julius Baer held talks with EFG International about a potential takeover in recent months but the discussions have stopped, people with knowledge of the matter told Reuters.
Czech billionaire Daniel Kretinsky is looking at options to try to persuade creditors to side with him in the battle for Atos, a source close to the matter said, as the distressed IT firm seeks a debt restructuring plan by May 31.
British IT services group Redcentric is in the early stages of talks over a sale of the company to Milan-listed Wiit SpA, it said. Amy-Jo Crowley scooped earlier on Friday that Redcentric was working with investment bank Lazard on an attempt to sell the company.
Private equity firm KKR is expected to get unconditional EU antitrust approval to buy Telecom Italia's (TIM) fixed-line network after agreeing to keep commercial agreements with TIM rivals, people with direct knowledge of the matter said.
First Abu Dhabi Bank (FAB) is in advanced talks to acquire Turkish conglomerate Koc Group's 61.2% stake in Istanbul-based lender Yapi Kredi for about $8 billion, according to three sources close to the matter.
Thank you for reading this week’s edition. Please do share the newsletter with anyone you think might find it useful.
To my U.S. readers – enjoy the long weekend!
Best,
Anirban
· · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·
Anirban Sen
Editor in Charge, U.S. Mergers & Acquisitions
Reuters News
Thomson Reuters