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Suzano Is in Talks With Asian Banks to Fund International Paper Bid

MEMPHIS (From news reports) -- Suzano SA, the world's largest producer of pulp, is in talks with banks including Mizuho Financial Group, Nomura Holdings Inc. and Mitsubishi UFJ Financial Group on the financing of a potential bid for US packaging giant International Paper Co., according to people familiar with the matter.

The Brazilian company is mulling a cash-and-stock offer for all of International Paper's assets, one of the people said, asking not to be identified because discussions are private. The funding arrangement with banks would mimic the one for Suzano's $11 billion acquisition of pulp rival Fibria SA in 2018, a transaction that included a bridge loan and a pre-export finance facility, and counted Mizuho among leading lenders, the people said.

Mizuho and Nomura declined to comment. Suzano and Mitsubishi didn't immediately respond.

Suzano confirmed that it is interested in International Paper assets. A combination between the two companies would create a pulp and paper powerhouse handling every step from eucalyptus tree planting to corrugated box distribution, with operations spanning North America to Japan.

The company already controls almost a third of global capacity for hardwood pulp, a key material in tissue and writing paper. An acquisition of International Paper would mark its first step into a much-anticipated push for internationalization and allow it to diversify operations into the more stable packaging sector.

To be sure, Suzano's acquisition plan would have significant hurdles in its way. To begin with, International Paper is more than twice as large as the Brazilian company in terms of sales and has a pending agreement to buy UK packaging rival DS Smith Plc for £5.8 billion ($7.4 billion), a combination that would make it too big for Suzano to swallow. Suzano's debt burden is already elevated at roughly 3.5 times earnings before items such as interest and taxes, which may limit the company's ability to take on a lot more debt without jeopardizing its investment grade rating.

The company, controlled by the Feffer family, has already demonstrated its ability to tap debt markets for megadeals. When it agreed to acquire Fibria -- which also was a larger company at the time -- the company got a $9.2 billion financing commitment from a group of banks led by Mizuho, Rabobank Groep, BNP Paribas SA and JPMorgan Chase & Co.

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