Why Kukje Paper solidified its position in May

Consolidation is heating up in the paper and packaging industry and speculation is building about it. international paper (IP 0.41%) It may be the subject of a transaction.

IP’s stock price rose 29% in May on investor hopes that the company’s future could have a big offering, according to data provided by S&P Global Market Intelligence.

IP as buyer and IP as seller?

Even in the digital world, there remains a demand for paper and packaging, and the industry has seen a flurry of deals in recent years as companies strive to build a global presence. International Paper is one of the potential buyers, agreeing to buy a British rival. DS Smith Early this year.

But the Brazilian paper giant Susano (SUZ -0.23%) You may have other thoughts. The company has reportedly contacted International Paper about a potential deal, and Reuters said the company may be willing to pay a significant premium to the IP deal price in early May.

The report said the deal would force International Paper to abandon its pursuit of DS Smith and raised questions about whether Suzano’s offer would be attractive to IP boards or acceptable to U.S. competition regulators.

Is International Paper stock a buy in trade talk?

Speculation continued to grow as the month progressed, with Bloomberg reporting that Suzano had begun discussions with several Asian banks to raise additional capital to bolster the offer. Suzano is clearly aware of the potential political backlash in the U.S. over the IP deal and is hoping to offer a price high enough to compensate for that risk.

While interest appears to be real, it is not yet clear whether that interest will lead to a signed merger agreement or final transaction. Investors who buy stocks purely for a quick paycheck are likely to be disappointed. That’s because even in the best-case scenario, the merger will take several quarters to complete.

But even if International Paper operates alone, all is not lost. The stock was upgraded to a Buy. Jeffries Analyst Philip Ng wrote later this month about its prospects as an independent company that he sees “multiple levers” to unlock value, including improving its portfolio, focusing on higher-margin products and growing in Europe through a potential DS Smith deal.

Depending on how deal talks go, investors could be in for a rough ride, but there are interesting reasons to take a look at IP stocks right now, deal or not.