Ireland's Smurfit Kappa on Monday said it had rejected an increased takeover offer from U.S. rival International Paper, saying the offer undervalued Europe's largest paper packaging producer and made no strategic sense.
Under International Paper's revised proposal, made on March 22, Smurfit's shareholders were offered 25.25 euros in cash, up from a previous offer of 22 euros and 0.3 new shares of International Paper for each share Smurfit share they hold.
The offer valued the company at 9.5 billion euros.
Smurfit said the revised proposal represents an increase in of 1.08 euro per share, or less than 3 percent, based on International Paper's closing price on March 23.
The "revised proposal fundamentally undervalues the group and remains significantly below the valuations set by recent industry transactions," Smurfit said.
"The Revised Proposal does not make strategic sense for Smurfit Kappa and its stakeholders," said Smurfit, which operates in 35 countries in Europe and the Americas.
Shares in Smurfit Kappa were down 2.3 percent at 0750 GMT.
International Paper said the cash component of the revised proposal is increased by 15 percent, based on its March 6 proposal.
It said that notwithstanding the rejection, it believed the revised proposal provided the best immediate and long-term value for Smurfit Kappa shareholders.
"We very much hope to have a constructive dialogue with Smurfit Kappa to help us to take this forward," International Paper said.
"We believe that there is a compelling strategic and financial logic for a combination. We view our Revised Proposal as attractive for both sets of shareholders."
The company said a deal with U.S.-listed International Paper would expose Smurfit shareholders to the risk of greater leverage and challenges of integrating two businesses with different cultures.
The bid comes as growing consumer spending and the popularity of online shopping have boosted demand for packaging.
The company reiterated that it sees its future as an independent company, headquartered in Ireland.
An acquisition would allow International Paper to significantly diversify its business beyond North America.
Smurfit, which operates in 35 countries in Europe and the Americas, recorded a slight rise in core annual profit to 1.24 billion euros ($1.5 billion) last year after a strong fourth quarter.