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Analyst: Investors Should ‘Applaud’ International Paper For Ending Proposed M&A Deal

Courtesy of Benzinga.

Analyst: Investors Should 'Applaud' International Paper For Ending Proposed M&A Deal

International Paper Co (NYSE: IP), a producer of renewable fiber-based packaging, confirmed Tuesday it will no longer pursue an acquisition Smurfit Kappa Group and investors should “applaud” the decision, according to BMO.

The Analyst

BMO Capital Markets’ Mark Wilde upgraded International Paper from Market Perform to Outperform with a price target lifted from $65 to $70.

The Thesis

International Paper’s decision to no longer pursue an acquisition of Smurfit Kappa is “good news” for shareholders, Wilde said in the June 6 note. The decision removes any near-term concerns that the company is pursuing a fully priced or even over-priced acquisition of a company that would generate a culture clash and come at the “relatively late” stage in the economic cycle.

International Paper has a reputation of overseeing poorly performing acquisitions and by not chasing Smurfit Kappa the management team sent a “very loud and constructive message” to the investment community, the analyst wrote. As such, the company now has the necessary resources to pursue more attractive options which could help boost the stock’s “substantial” valuation discount to its peers.

The analyst’s new $70 price target is based on an 8.2x multiple on 2019 EBITDA estimates and the prior $65 price target was based on a pro forma combined EBITDA of Intentional Paper had it acquired Smurfit Kappa.

Price Action

Shares of International Paper were trading around $58.76 Thursday afternoon.

Related Links:

Analysts: International Paper’s Smurfit Kappa Acquisition Could Create Near-Term Difficulties

The Paper Industry’s Activism In The Face Of Digitization

Latest Ratings for IP

Date Firm Action From To
Jun 2018 RBC Capital Upgrades Sector Perform Outperform
Jun 2018 Wells Fargo Upgrades Market Perform Outperform
Apr 2018 RBC Capital Downgrades Outperform Sector Perform

View More Analyst Ratings for IP


View the Latest Analyst Ratings

Posted-In: BMO Capital Markets Mark Wilde packaging paperAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga


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