Following Temple Inland Inc's rejection of an unsolicited $3.3 billion offer for its corrugated packaging business, rival company International Paper Co, has confirmed it is to take its proposal to the firm's shareholders.

Profit margins for corrugated packaging are very slight, so by taking over Temple Inland, International Paper would not only become the largest corrugated packaging company in the US, it would also be in a very strong position to control pricing in the industry. International Paper will submit its application to the US FTC and DoJ later today; however Temple Inland has already raised antitrust concerns and does not believe that approval would be granted.

The offer is for $30.60 per share, representing a 46% premium on the June 6th share price - the day upon which the initial offer was made. Currently, Temple Inland's shares are trading at $30.81, slightly higher than International Paper's offer which will expire on 9th August.

The management team at Temple Inland have asked shareholders to refrain from responding to the offer until they have considered International Paper's action. It has been made clear by International Paper that if the total share count is increased at a discount - in a move termed a poison pill - the offer will be withdrawn.

CEO of International Paper, John Faraci, commented: "I have a lot of respect for Temple's management. Our conversations have been open and professional. We just have a different point of view on how to proceed here. We've heard various values in the marketplace which we just say are totally unrealistic and are never going to happen."

Author: Lee Marriott, Analyst