International Paper proposes acquisition of DS Smith to enhance global packaging solutions

In a significant development within the packaging industry, International Paper Company has announced its intention to acquire DS Smith, a leading provider of sustainable packaging solutions. The proposed acquisition, which is currently under discussion, involves an all-equity offer whereby DS Smith shareholders would receive 0.1285 shares in International Paper for each DS Smith share they own. This deal structure would result in DS Smith shareholders owning approximately 33.8% of the combined entity. Based on International Paper’s share price of $40.85 as of the close of business on March 25, 2024, the offer values DS Smith at 415 pence per share. This represents a premium of 48% over DS Smith’s share price on February 7, 2024, the day before the offer period began, highlighting the strategic importance and financial attractiveness of this potential merger.

The proposed combination of International Paper and DS Smith is driven by a compelling strategic and financial rationale. It aims to create a global leader in sustainable packaging solutions, significantly strengthening the corrugated packaging business in Europe and providing enhanced customer offerings. Moreover, the merger would allow for the integration of mill and box networks, optimization of supply chains in Europe and the US, and leverage the combined market expertise and innovation capabilities of both management teams. This strategic move is anticipated to drive significant value creation for shareholders of both companies through synergies across integration, commercial and operational improvements, and economies of scale in sourcing, supply chain, and administration.

The merged entity is expected to hold a strong position in fast-moving consumer goods and e-commerce segments, promising enhanced value for global customers through innovative solutions and sustainability products. Furthermore, the combination is projected to maintain a robust balance sheet with an investment-grade credit rating, underpinning the financial health and stability of the merged group.

Under the U.K. Takeover Code, International Paper has until 5:00 p.m. on April 23, 2024, to either announce a firm intention to proceed with the offer or to withdraw its proposal. This deadline may be extended with the consent of the Takeover Panel, in line with regulatory requirements. International Paper also reserves the right to modify the terms of the offer or propose different terms, subject to the agreement or recommendation of the DS Smith Board or in response to a competing offer.

This announcement, made without the prior agreement or approval of DS Smith, marks a crucial juncture in the discussions between the two companies. A further announcement will be made as and when appropriate, providing stakeholders and the market with updates on this potential transformative deal in the packaging sector.