Wednesday, August 10, 2016 3:45 pm

MEMPHIS, Tenn. (From Barron's) -- Shares of International Paper (IP) have jumped Wednesday on what's being referred to as takeover chatter by Briefing.com.

BMO's Mark Wilde and team speculate:

International Paper is currently the subject of several reports on Bloomberg around a prospective takeover. The reports have included the suggestion that privately held Koch Industries could be an acquirer of International Paper. We are not taking any position on these reports. However, below we offer some general thoughts.

1) The Kochs have been actively consolidating the forest products sector for more than a decade, with acquisitions in pulp, containerboard, bleached board, lumber, panels, gypsum wallboard, and oriented strand board.

2) A Georgia-Pacific/International Paper combination would pose regulatory challenges and almost certainly require divestitures. The most obvious challenges would be in containerboard (combined market share of ~45%) and fluff pulp (pro forma combined market share of 65-70%, including International Paper's pending acquisition of Weyerhaeuser's (WY) fluff pulp assets).

3) Divestitures in all of these situations would likely draw multiple bidders. If Georgia-Pacific opted to "swap" its 4MM ton containerboard system for International Paper's 13.5MM ton system, we think the Georgia-Pacific business would attract interest from both domestic and offshore players. Similarly, fluff pulp mills could be attractive to N.A. producers as well as offshore companies.

4) A very big deal at an interesting point in the cycle? Despite evidence of reduced volatility, cyclical fears remain an overhang on most public companies. With a lengthening track record in the sector, the Kochs may be willing to take the other side of the argument.

Shares of International Paper have gained 1.6% to $46.78 at 3:52 p.m. today, while Weyerhaeuser has risen 1.1% to $32.69.