International Paper bids $3.3 bln for Temple-Inland

By Ernest Scheyder

NEW YORK (Reuters) – International Paper Co made a $3.3 billion unsolicited bid to buy smaller rival Temple-Inland Inc to cement its leading position in North America’s corrugated packaging business.

Temple-Inland rejected the $30.60 per share bid, a 46 percent premium to its stock’s closing price Monday, saying it “grossly undervalues” its assets.

Corrugated packaging is most commonly used to make shipping boxes and is normally sold for razor-thin profits. IP is hoping to take out a rival and consolidate pricing power.

“We think the combination brings together two good North American corrugated packaging businesses,” IP Chief Executive John Faraci told Reuters. “It’s consistent with our strategy. It makes our corrugated business an excellent one.”

The deal would add to IP’s earnings in “year one,” Faraci said. He declined to say if he would go hostile for Temple-Inland.

Shares of Temple-Inland rose 42.5 percent to $29.94 in after-hours trading. Shares of IP rose 3.3 percent to $30.63.

“As the economic recovery continues and the benefits from our strategy continue to be realized, it is the stockholders of Temple-Inland who should gain from those anticipated benefits, not the stockholders of IP,” Temple-Inland CEO Doyle Simons said in a statement.

The deal could end up being taken to shareholders, said Steven Chercover, paper and forest products analyst at D.A. Davidson.

“If the economy was perhaps a little stronger, then maybe we wouldn’t need this,” Chercover said. “But the economy is not strong enough to give pricing power, and I think the industry can more or less control its own destiny.” (Reporting by Ernest Scheyder, Matt Daily, and Mike Erman in New York, and Braden Reddall in San Francisco. Editing by Andre Grenon, Tim Dobbyn and Robert MacMillan)