In January this year, Walter Schalka, CEO of Suzano, said at an event that the company was starting to look more closely at its internationalization. A month later, the announcement came that the executive would be replaced, in July, by João Alberto Fernandez de Abreu, until then, CEO of Rumo.
The Brazilian paper and cellulose producer may be about to change command. But international plans appear intact in his roadmap. This is what a report published by the agency indicates. Reuters on Tuesday, May 6th.
According to the agency, which cites sources familiar with the negotiation, Suzano would have made an offer of almost US$15 billion to acquire International Paper, in a verbal proposal made to the Board of Directors of the American company and whose terms point to payment, in cash at US$42 per share.
“The market’s fear is that Suzano will offer a higher price than has been reported”, he tells the NeoFeed a manager bought in the SUZB3 share who criticizes the company’s delay in publishing a relevant fact about the possible transaction.
The agency Reuters highlights, however, that there is an inclination to reject Suzano’s offer. The denial would be linked, in part, to the fact that the Brazilian company would be making the agreement conditional on the suspension of the acquisition of the British DS Smith, announced in April by International Paper, for US$ 7.2 billion.
If the barriers are overcome, the agreement would take place four years after International Paper sold its operations in Brazil to Klabin, for R$330 million. And, in addition to marking Suzano’s entry into packaging and corrugated cardboard, it would create a giant in the paper, cellulose and packaging sector.
Some numbers help to measure what the result of combining these operations would be. Taking into account the 2023 balance sheets, the combined revenue would be just over US$27 billion, with a combined sales volume of 27.1 million tons of packaging.
According to data from Levante Insider Corp, the new company would have a projected Ebitda between R$30 billion (US$5.9 billion) and R$40 billion (US$7.9 billion) and would be trading with an EV/Ebitda 6 times. Considering current valuations, the combined market value would be more than US$26 billion.
In terms of production, the group would have 34 cellulose, paper and packaging factories, with International Paper greatly expanding this park by adding 28 structures to this account, in addition to 200 cardboard box conversion units and 18 recycling.
On this map, International Paper operates in more than 10 countries and serves a portfolio of more than 21 thousand customers. Today, abroad, Suzano, in turn, has representative offices in China and is present in the United States, Switzerland, Argentina and Austria.
In a report to clients titled “some very preliminary reflections”, BTG analysts are skeptical and show concern about the possible acquisition.
“Synergies? It’s still too early to say with limited visibility, but this move would be more to internationalize the company (in terms of product and geographically)”, reads an excerpt.
Numbers aside, the market’s initial response to a possible negotiation brought opposite reactions. On B3, Suzano shares ended the trading session down 12.27%. International Paper shares closed trading in New York with an increase of 5.20%.
One of the possible questions about an agreement would be the impact on Suzano’s debt, which closed 2023 with a net debt of R$55.5 billion and leverage, measured by the net debt/Ebitda ratio of 3 times, a level similar to the index 2.5 times from International Paper.
“Suzano is already the largest cellulose company in the world and is concluding a project that will increase its capacity by 25%”, says an analyst, in a reference to the Cerrado Project, a new cellulose factory that has been the group’s main focus since 2021 and which should start operating by June this year, with an investment of more than R$22 billion.
“Now, the market was expecting the company to deleverage and start paying dividends,” he says. “This shows the group’s old culture of leveraging itself to double its size. And at a stage where this is no longer necessary and in a segment that is not yours.”
The analyst adds that International Paper’s profitability is lower than that of Suzano and that the deal would take place at a time when interest rates are still high. “They have done this before and, in fact, have a history of getting projects right. But the market reaction is: again?”
According to Levante’s projections, if the transaction goes ahead, Suzano’s net debt would reach R$140 billion and leverage would be increased to 4 times. There are, however, those who see slightly different numbers and see the agreement as justifiable.
“Suzano is interested in a company bigger than itself, in a repetition of something that has already happened previously with Fibria”, he states, when NeoFeeda manager who was already bought on paper, but who, at this moment, no longer has a position in the company.
He adds: “The debt will be more than US$30 billion (R$151 billion) for a leverage of 5.5 times. For an international business, it seems like it’s not that far-fetched.”
The fact is that an eventual agreement would position Suzano at a time when the sector has been the stage for other M&As involving billion-dollar figures. In addition to the purchase of DS Smith by International Paper itself, another major announcement part of this movement was made in September 2023.
At the time, the Irish Smurfit Kappa and the American West Rock announced the merger of their operations, creating, at the time, the largest publicly traded packaging paper company, with a market value of around US$20 billion, revenue of US$34 billion and presence in more than 40 countries.
After saying that it would not comment on the matter, Suzano published the following note on the CVM at 7:05 pm:
“The Company is permanently analyzing market opportunities and investments aligned with its strategy. However, the Company clarifies that, to date, there is no formal document or conclusion of any agreement, binding or not, on the part of Suzano, nor any decision or deliberation of its management bodies in relation to the potential operation reported by the media. The Company also informs that it carried out the relevant internal investigations and questioned its administrators about the news published in the media before providing this clarification”.
Márcio Kroehn collaborated
Tags: Suzano purchase International Paper create giant market didnt
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