International Paper (IP) and DS Smith announced that they have reached a takeover agreement, resulting in a 66.3 per cent ownership of IP in the combined company and 33.7 per cent for DS Smith shareholders, implying a transaction value of about $9.9bn.
The transaction is to create a global leader in packaging solutions focussing on the North American and European regions. About 90 per cent of the enlarged company's sales revenues will come from fiber-based packaging.
The takeover will combine DS Smith's extensive European sales revenues of $9.4bn with IP's European sales of $1.5bn. IP says its North American eastern region business will be enhanced by DS Smith's complementary box network. The integration of about 500,000-600,000 tonnes per year of DS Smith's containerboard capacities into the IP mill system will increase the combined integration rate to about 90 per cent.
London-based DS Smith describes itself as one of Europe's leading recyclers of recovered paper, reporting that it handles more than 5.5 million tonnes of recovered paper per year. The company's Kemsley paper mill in Kent, with its annual production capacity of 830,000 tonnes, is the second largest recovered fibre-based paper operation in Europe, according to DS Smith.
IP's and DS Smith's product portfolio are highly complementary, the two companies say. The transaction will increase exposure to the attractive fast-moving consumer good and e-commerce market segments. It is expected to deliver at least $514m of pre-tax cash synergies by the end of the fourth year following the close of the combination. Pro forma combined sales revenues for 2023 amount to $28.2bn and adjusted Ebitda to approximately $4.1bn.
Andrew K. Silvernail will be the CEO of the combined company, Miles Roberts will be retained as a consultant to assist with integration matters. Up to two non-executive directors of DS will be invited to join the Board of the combined company, which will be headquartered in Memphis, Tennessee, USA. There are plans to establish an EMEA headquarters at DS Smith's existing London headquarters.
