Global Shake-Up: International Paper’s £5.8b DS Smith Buy-Out

The proposed takeover, which both sets of shareholders will vote on will see the establishment of the world's largest packaging consortium

Wed 17 Apr 24


DS Smith, one of the world’s largest cardboard box makers, has agreed to a £5.8bn takeover by International Paper, one of the world’s largest paper companies. The deal, if approved by both groups of shareholders, will see the combined company create the world’s largest packaging consortium.

The deal, which promises to bring the two paper giants together, will capitalise on “industry-leading positions in two of the most attractive geographies of Europe and North America,” according to an International Paper spokesperson.

It comes after the Tennessee-based International Paper last month gatecrashed a £5.14bn all-share deal for the FTSE 100 DS Smith,  put forward by British rival Mondi.

Wood Central understands that International Paper and Mondi had until an April 23 deadline to make a formal offer or walk away – with Mondi declining to comment on the deal.

The London-based DS Smith has faced a global slowdown in the paper and packaging industry across Europe and Brexit, resulting in slower-than-expected revenue. Footage courtesy of @CNBCInternationalTV.

As reported by Reuters, DS Smith’s revenue for the year has declined, mainly due to lower volumes and a fall in packaging and paper prices, with the deal allowing International Paper to expand its European presence at a time of consolidation across the industry. 

According to a statement overnight, International Paper will now seek a secondary listing on the London Stock Exchange and establish a European headquarters at DS Smith’s existing London base.

In joint statements, both claim the deal will create a global leader in sustainable packaging and create opportunities to drive savings across the mill network, supply chains and freight costs. In addition, they expect to reap cost savings of at least £413m per year by 2029/2030 – the fourth year of the proposed takeover.

To achieve this, more than 400 senior management personnel are on the chopping block, which equates to 0.6% of the combined workforce of a 69,000 workforce – which includes 4,750 staff in the UK.

Under the takeover terms, DS Smith investors will receive 0.1285 International Paper shares for each DS Smith share, valuing DS Smith shares at 415p based on March 25 prices, the last day before the announcement of a possible offer.

Once finalised, International Paper shareholders will own 66% of the combined company and DS Smith investors will hold the rest.

As per the deal, DS Smith CEO Miles Roberts will act as a consultant to the new company, and Richard Pike, the UK’s financial director, will be paid a retention of £550,000 to stay on at the new business.

DS Smith was founded in east London in the 1940s by two cousins, David G and David S Smith, as a box-making business – named after their grandfather, a Polish immigrant involved in the original business set-up.

Listed on the London Stock Exchange since the late 1950s, it has grown through several acquisitions, supplying paper and packaging products in more than 30 countries.

The proposed deal is the latest in a recent flurry of takeover bids for UK firms. Private equity and some industry firms have been snapping up British assets that are considered cheap, as the sterling remains weak after Brexit, the Covid pandemic, and the Liz Truss government’s disastrous mini-budget in the autumn of 2022.


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