DS Smith has agreed to the terms of an all-share deal announced by International Paper on Tuesday to buy the company for an estimated $7.2 billion, a major development in a bidding war for the London-based paper packaging company. DS Smith’s board of directors intends to recommend that shareholders approve the deal.
IP had been operating under an April 23 deadline to submit a formal offer, as had Mondi, the initial bidder for DS Smith earlier this year.
DS Smith and IP expect this transaction would deliver at least $514 million of pre-tax cash synergies on an annual run-rate basis by the end of the fourth year, with an anticipated $370 million in costs to achieve them. Nearly half would be operational synergies across the combined network of mills, box plants and global supply chain. The companies expect that approximately one-third of the overall synergies would be achieved in the first year.
Memphis, Tennessee-based IP plans to keep its current headquarters while also retaining DS Smith’s London headquarters. It would primarily list on the New York Stock Exchange, with a secondary listing on the London Stock Exchange.
“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,” DS Smith CEO Miles Roberts said in a statement Tuesday.
IP executives similarly heralded the two companies’ complementary business models and how this transaction would strengthen both in the European and North American markets.
"Combining with DS Smith is a logical next step in International Paper's strategy to drive profitable growth by strengthening our global packaging business,” International Paper CEO Mark Sutton said in a statement Tuesday.
Incoming CEO Andrew Silvernail, who will take over for Sutton on May 1 and would be the combined company’s CEO, said of the deal: “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.”
The companies project that the deal will close by the fourth quarter, which would make it the second major paper packaging acquisition in 2024. Smurfit Kappa has said it expects to finalize its combination with WestRock in July.
Earlier this month, DS Smith had extended the deadline for Mondi to submit a formal purchase offer. Mondi initially stated interest in buying DS Smith in early February. International Paper entered the bidding war March 26 when it announced its own acquisition proposal. Memphis, Tennessee-based IP offered more details of its counterproposal on April 4 when DS Smith extended Mondi’s formal offer deadline — thus making both bidding companies’ deadlines April 23.
International Paper said Tuesday that pro forma ownership for its shareholders would be 66.3% and DS Smith’s would be 33.7%. DS Smith said the offer reflects a nearly 48% premium on the closing price of its shares on Feb. 7, the date before Mondi expressed preliminary interest in an acquisition.
A March 7 possible offer detailed by Mondi, valued at about $6.5 billion, proposed 54% ownership for Mondi shareholders and 46% for DS Smith’s.
