Why Fibria Celulose SA Stock Just Sank 10%

What happened

Shares of Fibria Celulose S.A. (NYSE: FBR) plummeted 9.6% in early Friday trading (as of 11 a.m. EDT) after news broke that the Brazilian paper "pulp" maker will accept a smaller buyout offer from local peer Suzano Papel e Celulose SA than had been offered from Dutch rival Paper Excellence BV.

So what

Paper Excellence had offered to pay as much as 40 billion Brazilian reais (about $12.2 billion) for Fibria Celulose, and the prospect of this windfall had helped lift Fibria stock 15% since the end of February to its $21.64 close yesterday. Unfortunately for Paper Excellence (and for Fibria shareholders), Fibria Celulose management argues that what Paper Excellence was offering was more an "intention to present a proposal" than an actual bid, and that the putative acquirer failed to "present financing for the bid or guarantees."

Given the uncertain nature of Paper Excellence's bid, Fibria management therefore opted to go with a lower offer from local rival Suzano -- about 35 billion reais, or $10.7 billion, but with a "commitment" from banks to back the bid.

Now what

Suzano is offering a combination of cash and its own shares in payment for Fibria Celulose's equity. Thus, the value of the acquisition could still fluctuate with the value of Suzano's own shares before the deal closes. (In fact, Reuters reports that with Suzano's share on the upswing, the effective value of the bid has already increased by about 2.2%).

Antitrust approval also still needs to be sought and secured in multiple places -- Brazil, the United States, the European Union, and China to name a few. The longer that takes, the higher the chance that the deal's value will continue to change. And of course, if any one of these antitrust authorities chooses to veto it, there's still a chance that Paper Excellence will have another opportunity to bid.

10 stocks we like better than Votorantim Celulose e PapelWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Votorantim Celulose e Papel wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of March 5, 2018

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.