Irish packaging group Smurfit Kappa has rejected an unsolicited bid approach from U.S.-based International Paper Co, saying the proposal "fails entirely" to reflect its growth prospects and attractive industry outlook.

Smurfit Kappa, Europe's largest producer of paper-based packaging, said on Tuesday that under the proposal its shareholders would receive a combination of cash and a minority holding in the combined business.

But it advised shareholders to take no action, saying the approach "significantly undervalues" the group's asset, franchise and replacement value and was significantly below the valuations set by recent industry transactions.

"The Board of Smurfit Kappa has unanimously rejected this unsolicited and highly opportunistic Proposal. It does not reflect the Group's true intrinsic business worth or its prospects. We strongly advise shareholders to take no action," Smurfit Kappa chairman Liam O'Mahony said in a statement.

"The Board believes that it is in the best interests of all stakeholders for the Group to pursue its future as an independent company."

It did not disclose the detailed terms of the offer and said it was responding without the consent of International Paper.

Traders said Smurfit Kappa's shares were expected to open 7-10 percent higher on the back of the approach.

Smurfit Kappa, which operates in 34 countries in Europe and the Americas, recorded a slight rise in full-year earnings to 1.24 billion euros ($1.5 billion) last year after a strong fourth quarter. It said on Tuesday that the underlying positive trading conditions had continued into 2018.

As part of its full-year results, it announced an acceleration of its investment programme that it said would improve its market position between 2018 and 2021.

International Paper's market capitalization is almost three times that of Smurfit Kappa at $24.1 billion.

The Memphis-based group combined its North America consumer packaging business with Graphic Packaging Holding Co in a deal that valued the International Paper division at $1.8 billion.