(International Paper-Temple Inland item update with further analyst commentary.)NEW YORK ( TheStreet) -- International Paper's ( IP) move to acquire Temple-Inland ( TIN) is yet another example of how low interest rates are motivating deals among manufacturing companies on the hunt for growth and increased market share. Credit-worthy corporations are racing to take advantage of inexpensive loans before rates eventually rise, analysts say. "To borrow money now is cheap," said Thomas Mullarkey, a stock analyst who covers packaging makers and other manufacturing companies for Morningstar ( MORN) in Chicago. "IP can probably get 5%
After the closing bell Monday, International Paper went public with its offer of $30.60 per share, or $3.38 billion, after a round of private talks last month that fell through. In its presentation, Temple-Inland argues that its profit margins are wider than what IP has given it credit for in its "opportunistic" bid. Temple also raised the prospect of antitrust hurdles that IP would face. A successful acquisition would bring the Memphis, Tenn.-based IP's market share up to nearly 40% of the packaging market. Still, notes Morningstar analyst Mullarkey, the highly consolidated aluminum-can market saw Ball Corp. ( BLL) acquire several plants from Anheuser-Busch Inbev ( BUD) two years ago without regulatory problems. The deal lifted Ball's share to 40% of the can market, Mullarkey said. Shares of Temple-Inland were trading below the offer price, at $29.54, up 40% from the previous close. IP shares, meanwhile, were gaining almost 0.6% to $29.82. The deal news drove share prices higher among several other paper-and-packaging companies as investors bet on further consolidation and increasing asset values. Packaging Corp. of America ( PKG) shares were rising 6.5%, while MeadWestvaco ( MWV) was gaining 4.4%. -- Written by Scott Eden in New York To contact the writer of this article, click here: Scott Eden.
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