It was the end of the suspense. Finally, DS Smith married International Paper, not Mondi. The two companies today announced that they have reached agreement on the terms of a recommended all-share combination creating a truly global leader in sustainable packaging solutions.
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 percent for IP shareholders and 33.7 percent for DS Smith shareholders, implying a transaction value of approximately $9.9 billion. The Combination is expected to close by the fourth quarter of 2024.
“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 CEO of IP. “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.”
CEO-Elect of IP, Andrew K. Silvernail added, “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. 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.”
Compelling Strategic Opportunity
- Creates a global leader in sustainable packaging solutions, focused on the attractive and growing North American and European regions
- Establishes a differentiated corrugated packaging company with approximately 90% of revenue from sustainable fiber-based packaging
- Expands IP’s footprint and capabilities in the attractive European region
- Combines DS Smith’s extensive European sales of $9.4 billion4 in FY23 with IP’s European sales of $1.5 billion in FY23
- Enhances IP’s business in North America’s eastern region with the addition of DS Smith’s complementary box network
Complementary business models increase vertical integration to improve profitability
- Integration of approximately 500-600k tons of containerboard from DS Smith into the IP mill system will increase the combined integration rate to approximately 90%.
- Optimizes the combined network of mills, box plants, and supply chains.
Strengthens customer value proposition through enhanced offerings, innovation, and geographic reach
- Enhances ability to serve global customers with a highly complementary, quality portfolio and broader product offerings.
- Increases exposure to the attractive, fast-moving consumer goods and e-commerce segments.
- Greater opportunity for cross-selling products and services across respective regional and global customers.
- Combines market and commercial expertise, and innovation capabilities.
- Generates revenue synergies primarily from incremental sales generated by DS Smith’s Innovation Network being extended to IP’s European customers.
Similar cultures and experienced teams ensure low integration and operational risk
- Intention to retain DS Smith’s London headquarters as IP’s new EMEA headquarters.
- Both the IP and DS Smith teams, including IP CEO-Elect Andrew K. Silvernail, have expertise and experience in successfully integrating large scale acquisitions.
Value Creation
Substantial synergies through global scale and optimization
- Expected to deliver at least $514 million of pre-tax cash synergies on an annual run-rate basis by the end of the fourth year following the close of the Combination
- IP anticipates that the total costs to achieve the synergies would be approximately $370 million.
- IP expects that approximately 33% of the synergies would be achieved in year one, with approximately 66% achieved in year two and 95% achieved in year three following close of the transaction, all on a run-rate basis.
Strong pro forma financial profile will enable accelerated growth
- Pro forma 2023 combined revenues of approximately $28.2 billion and combined adjusted EBITDA of approximately $4.1 billion.
- Primary listing on the New York Stock Exchange and a secondary listing on the London Stock Exchange.
The Combination is expected to close by the fourth quarter of 2024, subject to IP and DS Smith shareholder approval and customary closing conditions, including receipt of regulatory clearances, in Europe and the U.S.
Andrew K. Silvernail will be CEO of the combined company and Miles Roberts will be retained as a consultant to assist with integration matters. As part of the Combination, up to two non-executive directors of DS Smith will be invited to join the Board of the combined company upon close of the Combination.
The combined company will be headquartered in Memphis, Tennessee, with plans to establish an EMEA headquarters at DS Smith’s existing London headquarters.
V. L.
- International Paper employs approximately 40,000 colleagues globally. The company serves customers worldwide, with manufacturing operations in North America, Latin America, North Africa, and Europe. Net sales for 2023 were $18.9 billion.
- DS Smith operates in 34 countries employing around 30,000 people. For its last fiscal year which ended in April 2023, its TO was £8,3 billion.
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