Suzano's $15bn Bid: Acquisition Offer for International Paper Announced

09 May, 2024

Suzano's $15bn Bid Acquisition Offer for International Paper Announced

Suzano has proposed a $15 billion bid for the assets of American company International Paper (IP), marking a significant step in its internationalization strategy. This initial offer, reported by Reuters and confirmed by Valor, is to be paid entirely in cash and is partly financed by additional cash expected from the startup of Suzano’s Cerrado Project, scheduled for completion by the end of June.

If successful, this acquisition would echo Suzano’s 2019 purchase of Fibria, placing the Brazilian firm at the forefront of the global fluff pulp market (used in products like diapers and toilet paper) and kraftliner packaging paper. It would also mark Suzano’s entry into the paper and corrugated cardboard packaging market and solidify its plans for international expansion with industrial operations.

The deal would involve taking over 28 pulp, paper, and packaging mills, as well as 200 cardboard box converting units and 18 recycling units across 11 countries, including the United States. There would be no integration of assets in Brazil, as IP had already sold its local corrugated packaging business to Klabin in 2020 and spun off its entire printing and writing paper operation into a new company, Sylvamo, which owns three mills and forests in Brazil, in 2021.

The proposal, which is expected to be formalized soon, also entails cancelling an existing agreement for IP to acquire British competitor DS Smith for about $9.9 billion.

From a strategic perspective, Patrick Cavanagh, a senior economist at Fastmarkets, mentioned that the acquisition would significantly diversify Suzano’s operations. The deal would not only increase Suzano’s scale in markets where it has recently invested but also broaden its product range in pulp and paper. Suzano currently produces fluff, used in disposable diapers and absorbent pads, from hardwood pulp while IP utilizes softwood pulp, for example.

“The acquisition of IP’s cellulose fiber business would elevate Suzano from being one of the smallest fluff producers globally—eighth currently, holding just over 1% market share—to a leading position,” Mr. Cavanagh stated in an email interview. “It would also position Suzano as a front-runner in the global kraftliner market, where IP controls nearly a quarter of the global supply.”

Suzano’s proposal is part of a broader trend of consolidation in the global packaging industry, highlighted by the recent acquisition of American WestRock by Irish SmurfitKappa, which is expected to be finalized by the end of the quarter. Furthermore, the agreement between IP and DS Smith signed less than a month ago, has sparked a competitive scenario with Mondi, which had already agreed in early March to merge operations with DS.