BMO Shares Its Take On International Paper Buyout Rumors

BMO Capital Market's Mark Wilde commented on International Paper Co's IP recent takeover rumors in which Koch Industries could be an acquirer. The analyst didn't take a clear position on whether the rumors were true, but gave further analysis on the likelihood of a takeover and how the probability could increase in the future.

"The Kochs have been actively consolidating the forest products sector for more than a decade, with acquisitions in pulp, containerboard, bleached board, lumber, panels, gypsum wallboard, and oriented strand board," stated Wilde.

If the takeover were to occur today, a combined Koch/IP would have a market share of 45 percent and a pro forma market share of 65-70 percent. Since market share in certain segments would be overly-large, regulation could pose major challenges to the deal according to Mamtora.

Divesting Would Greatly Increase Probability

If, however, International Papers were to divest in both of these markets, the company "would likely draw multiple bidders," stated Wilde.

He continued, "If GP opted to "swap" its 4MM ton containerboard system for IP's 13.5MM ton system, we think the GP business would attract interest from both domestic and offshore players. Similarly, fluff pulp mills could be attractive to N.A. producers as well as offshore companies."

According to TipRanks, Wilde has a 76 percent success rating and a +12 percent average return per recommendation. The analyst has a market perform rating on International Paper and a $47.00 price target.

At time of writing, International Paper traded at $46.61.