Suzano Ends Acquisition Talks with International Paper Over Pricing Concerns

Suzano yesterday called off its acquisition discussions with International Paper due to unresolved pricing disagreements.

In May, the Brazilian company put forth a bold $15 billion bid, approximately $42 per share, mirroring its market value at the time.

Although Suzano aimed to expand its business beyond its traditional cellulose sector, the steep price led to halting the negotiations.

Moreover, International Paper, a major force in the packaging and long-fiber pulp industries, was merging with DS Smith, a deal set to conclude by late 2024.

This merger complicated the talks, as Suzano sought to overturn these plans within its acquisition strategy.

Investors also worried about the potential debt Suzano might incur and the unclear synergies between the two companies’ operations.

These apprehensions intensified with expectations that Suzano should prioritize debt reduction post its Cerrado project.

Consequently, Suzano’s shares dropped by 7.85% over the year.

Additionally, the broader market conditions, including the rebound in cellulose prices and the Brazilian real’s depreciation, framed these discussions.

Ultimately, when Suzano identified its final offer as the highest price that would deliver shareholder value without International Paper’s engagement, the negotiations ceased.

Background

Suzano, a top pulp producer, was pursuing a strategic acquisition of International Paper, a move that could have reshaped the global industry.

Suzano was considering a substantial financial strategy, potentially borrowing up to $19 billion.

This level of borrowing would have maintained its net debt to EBITDA ratio near five times, a leverage it has managed since regaining its investment-grade status in 2018.

International Paper, headquartered in Memphis, Tennessee, USA, stands as a global leader in the paper and packaging industry.

Meanwhile, Suzano, based in São Paulo, Brazil, emerges as a key player in the pulp and paper sector.

Initially, Suzano made a cash offer of $42 per share, which valued International Paper at nearly $15 billion.

However, International Paper deemed this insufficient, holding out for at least $50 per share, bringing the valuation to approximately $17.3 billion.

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