Temple-Inland rejects second hostile bid from IP, time is on International Paper's side

Packaging industry analysts are calling International Paper’s bid to take over Temple-Inland “patient hostile.”

Temple-Inland’s (TIN) board of directors has now rejected a second offer from IP — this one just last Monday in the amount of $30.60 per share because it feels the offer grossly undervalues the company.

Specifically, Forbes, Inc. reported, Temple-Inland said the offer does not recognize expected benefits in box plant transformation, the company's low-cost building products operations, and its strategic place in the industry, among other shortcomings.

"Since we launched the 'new' Temple-Inland in January 2008, we have delivered superior results to our stockholders compared with our corrugated packaging peers, building products peers, and the S&P 500. The Temple-Inland Board is unanimous in its belief that the offer grossly undervalues Temple-Inland and its prospects, including its position as the return on asset leader in the corrugated packaging industry, expected benefits from box plant transformation, its low-cost building products operation, and its strategic place within the industry as the third largest producer of corrugated packaging in North America," Doyle R. Simons, chairman and CEO of Temple-Inland, said in a statement released in conjunction with the rejection announcement.

In the midst of the second offer, TI reported its second quarter earnings —17 cents per diluted share versus 15 cents per share in the first quarter. Second quarter net income was $19 million versus $16 million in the first quarter. Results were down from the same time last year, which was 18 cents and $20 million.

Memphis, Tenn.-based IP made its first offer in June, which was rejected, and made a second, unsolicited offer on July 11. Temple-Inland’s board has recommended its share holders reject the offer, too.

But, as the analysts pointed out in June, International Paper has pockets deep enough to take its time in structuring the acquisition.

Hence the term “patient hostile.”

TI, which is incorporated in Delaware, has a 10-member board with four members up for reelection each year. Under Delaware law, the company can push its next meeting no more than 13 months from the last one — which means June or July 2012. If International Paper is successful and elects its own four members to the board, it would still be short of votes and would have to wait yet another year to garner the majority needed to approve the takeover.

While the move may not seem to make much sense, analysts say that it keeps pressure on the Temple-Inland board and to extract additional information from the Austin, Texas-based company.

Temple-Inland owns and operates seven containerboard mills and more than 40 box plants, including one each in Bogalusa.