BY Richard Summerfield
UK packaging specialist DS Smith is to be acquired by US rival International Paper in an all-stock deal worth $7.2bn.
The all-stock transaction will create a global leader in packaging, according to International Paper. Upon completion of the sale, DS Smith shareholders will own about 33.7 percent of the combined entity, with International Paper shareholders owning the rest. Subject to shareholder and regulatory approval, the deal is expected to close later this year.
International Paper agreed to pay 0.1285 new shares of International Paper for each DS Smith share, or about 415 pence based on the share prices of both companies as of late March, when the US company publicly announced its interest.
The formal agreement for DS Smith gives International Paper the backing of the company’s board, however rival suitor Mondi Plc could still return with a competing offer. In March, Mondi reached an agreement in principle to buy DS Smith in an all-stock deal of £5.14bn, with the purchase price representing a 33 percent premium at that time and DS Smith shareholders getting control of 46 percent of the new company. Whether Mondi will return with a further bid remains to be seen. The company has until 23 April to make a firm offer or walk away from any potential deal.
“Combining with DS Smith is a logical next step in IP’s strategy to drive profitable growth by strengthening our global packaging business,” said Mark S. Sutton, chairman and chief executive of International Paper. “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.”
“Bringing together the capabilities and expertise of both companies will create a winning position in renewable packaging across Europe, while also enhancing IP’s North American business,” said Andrew K. Silvernail, chief executive-elect of International Paper. “I firmly believe this strategic combination offers a unique and highly compelling opportunity to create tremendous shareholder value. I am also committed to working with the teams to deliver the expected synergies, along with the ongoing profit improvement initiatives across the IP portfolio.”
“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,” said Miles Roberts, chief executive of DS Smith. “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.”
News: DS Smith agrees $7.2 bln all-share deal with International Paper