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International Paper (NYSE:IP) may be worth $54-$57a a share in a potential takeover by Suzano (SUZ) after a report that the Brazilian company is looking to raise up to $19 billion in debt for a deal.
“This is in line with the range that, we have long argued, IP shareholders would consider, but we suspect the board sees the intrinsic value notably above those levels,” Jefferies analyst Philip Ng wrote in a note on Frida. Ng has a buy rating and $57 price target on Intl Paper (IP).
Suzanne could borrow as much as $19 billion while still keeping net debt for the combined company close to five times earnings before interest, taxes, depreciation, and amortization, Bloomberg reported earlier Thursday, citing people familiar with the matter.
“With IP shareholders urging the company to divest its Cellulose business, we believe the likelihood that IP shareholders would be willing to accept stock in a Brazilian pulp company is extremely low, and Suzano’s share price has been falling since the news came out that they’re interested in IP,” Ng added. “The news that Suzano is looking to borrow as much at $19 bil of debt lines up with our view that anything less than a mid-$50s cash offer wouldn’t be taken seriously.”
Jefferies’ NG has a buy rating and $57 price target on Intl Paper (IP).
Intl Paper (IP) has rejected Suzano’s (SUZ) $ 42-a-share bid as too low, according to reports. Reuters reported last month that the Brazilian pulp and paper company was considering raising its $15 billion takeover offer by a few dollars.