International Paper secures full acquisition of DS Smith for £5.8B

16 Apr 2024 --- International Paper (IP) has announced an agreement for an all-share takeover of DS Smith, following weeks of speculation. The US-based packaging giant will acquire the entire company for £5.8 billion (US$7.2 billion) and deliver at least US$514 million in pre-tax cash synergies. 

The terms of the combination value each DS Smith share at 415 pence per share and will result in IP issuing 0.1285 shares for each DS Smith share, resulting in pro forma ownership of 66.3% for IP shareholders and 33.7% for DS Smith shareholders.  

According to IP, this implies a transaction value of approximately US$9.9 billion. The combination is expected to close by the fourth quarter of 2024.

However, packaging analyst Neil Farmer tells Packaging Insights: “There is still time for Mondi to make a counter bid. It would have to be a really good offer to beat the IP offer.”

“As I have said, IP will retain a secondary listing on the London market and use the DS Smith operations as a European base. This could be good news for the London Stock Exchange, which has lost many firms over the last year, as they move to the US and Europe.”

Mark S. Sutton, chairman and CEO of IP, says: “Combining with DS Smith is a logical next step in IP’s strategy to drive profitable growth by strengthening our global packaging business.”

“DS Smith is a leader in packaging solutions with an extensive reach across Europe, which complements IP’s capabilities and will accelerate growth through innovation and sustainability. We are confident this combination will drive significant value for our employees, customers and shareholders.”

“Bidding war” over
The deal ends weeks of speculation over if and who DS Smith would be acquired by Mondi, which made an initial offering of £5.14 billion (US$6.57 billion). This deal was said to be “reached in principle.”

However, it was announced shortly after that IP had made its own bid of £5.72 billion (US$7.22 billion), which would trump Mondi’s original offer. The move sparked the prospect of a bidding war for DS Smith.

Following today’s announcement, DS Smith’s CEO, Miles Roberts, says, “The combination with IP is an attractive opportunity to create a truly international sustainable packaging solutions leader that is well positioned in attractive and growing markets across Europe and North America.”

“It combines two focused and complementary businesses. DS Smith has grown significantly through a dedication to customers, focus on innovation, quality of packaging and high levels of service. In a dynamic sustainable packaging landscape, the combination will enhance our global proposition to customers, create opportunities for colleagues and drive value for shareholders who can remain fully invested in such an exciting business.”

By Louis Gore-Langton

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