Barclays on U.S. Paper & Forest Products: IP Makes Hostile Bid for TIN
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Rating Summary:
10 Buy, 8 Hold, 6 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 17 | Down: 14 | New: 16
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Barclays on U.S. Paper & Forest Products: IP Makes Hostile Bid for TIN
Barclays analyst says, "Last night (6/6), International Paper (NYSE: IP)(Underweight rated) announced a hostile bid to acquire Temple-Inland (NYSE: TIN)(Equalweight) for $30.60/share in cash. Our first reactions are as follows: We are surprised to see IP launch the first hostile bid in the industry since the Weyerhaeuser/Willamette deal was announced nearly a decade ago. In part, we attribute the hostile bid to increased urgency to take advantage of historically cheap cost of debt financing. We would not be surprised if the transaction leads to other transactions within the industry. It will be interesting to see if private equity investors follow the lead of International Paper to lock in cheap financing to make hostile bids for companies. If so, we believe our top picks (Weyerhaeuser (NYSE: WY), Louisiana Pacific (NYSE: LPX), Rayonier (NYSE: RYN), Plum Creek (NYSE: PCL)) are very well positioned for such an environment (either directly, or indirectly as lateral valuation beneficiaries)."
"Given our view that IP can pay up to $41 per share for TIN while remaining valuation neutral, we believe shares of TIN are likely to trade well above the offer price of $30.60 per share. This is likely to be muted somewhat by our view that TIN has strong corporate defenses which are likely to prolong the timing of a possible transaction. We maintain a 2-EW rating on shares of TIN, but as we continue to evaluate this transaction, we believe there could be considerable upside risk to our $25 per share target."
Barclays analyst says, "Last night (6/6), International Paper (NYSE: IP)(Underweight rated) announced a hostile bid to acquire Temple-Inland (NYSE: TIN)(Equalweight) for $30.60/share in cash. Our first reactions are as follows: We are surprised to see IP launch the first hostile bid in the industry since the Weyerhaeuser/Willamette deal was announced nearly a decade ago. In part, we attribute the hostile bid to increased urgency to take advantage of historically cheap cost of debt financing. We would not be surprised if the transaction leads to other transactions within the industry. It will be interesting to see if private equity investors follow the lead of International Paper to lock in cheap financing to make hostile bids for companies. If so, we believe our top picks (Weyerhaeuser (NYSE: WY), Louisiana Pacific (NYSE: LPX), Rayonier (NYSE: RYN), Plum Creek (NYSE: PCL)) are very well positioned for such an environment (either directly, or indirectly as lateral valuation beneficiaries)."
"Given our view that IP can pay up to $41 per share for TIN while remaining valuation neutral, we believe shares of TIN are likely to trade well above the offer price of $30.60 per share. This is likely to be muted somewhat by our view that TIN has strong corporate defenses which are likely to prolong the timing of a possible transaction. We maintain a 2-EW rating on shares of TIN, but as we continue to evaluate this transaction, we believe there could be considerable upside risk to our $25 per share target."
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