Shares of International Paper, which supplies cardboard to Amazon and other retailers, shot up Thursday following a report that two private-equity firms are bidding for its European business. That gave the stock a much-needed boost after falling more nearly 20% this year as the paper and packaging industry struggles with higher costs.
The Financial Times reported early Thursday that private-equity firms Lone Star and Atlas Holdings are the "final suitors" for the division and may place bids for less than $6 billion. The report pushed the stock up 7% by midday. For a while, it rose even further, north of 8% at $34.46 in the afternoon after the company confirmed that it was evaluating "unsolicited" bids for the division. The stock is currently up 6.4%.
"This process is at an early stage and there can be no certainty that any sale of the EMEA Packaging Business will be agreed or completed," it said. The company didn't name the bidders. Lone Star declined to comment and Atlas didn't reply to Barron's request for comment.
While $6 billion is much less than International Paper paid for the business when it acquired it in 2024 for around $7.2 billion, investors seem happy about the deal.
"We believe an outright sale would better position IP, giving it cash to deliver, fund its dividend, and continue to refine and upgrade its North America operations," Truist analyst Michael Roxland wrote in a Thursday note.
"Post-sale, we believe that standalone IP North America could ultimately re-rate higher depending on its execution," Roxland added.
International Paper had previously said it was expecting to spin the company off and list it as a publicly traded company on the London Stock Exchange with American depositary receipts trading in the U.S.
Paper and packaging stocks have gone through rough a patch lately as their input costs have risen, including the cost of energy to make their products and fuel to transport it.
Those headwinds have led to a flurry of analyst price downgrades for International Paper over the last few weeks, including from Truist's Roxland, who wrote earlier this week about the sector that, "looking into 4Q, we see little potential for improving demand or declining input costs without a resolution which could then take several weeks to roll through supply chains."
But most analysts still see potential upside for the stock. Of the 14 analysts surveyed by FactSet who cover the stock, 9 rate it a buy, down from 10 last month.
Shares of two other paper companies, Packaging Corporation of America and Smurfit Westrock, were up 1.% and 0.9%, respectively.
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