US packaging company International Paper (IP) has reached an agreement to acquire UK-based DS Smith for £5.8bn ($7.2bn), beating rival suitor Mondi and creating a global leader in the packaging business.
Earlier, the two companies had a deadline of 23 April 2024 to make a firm offer or not.
In March 2024, Mondi reached an agreement in principle to acquire Smith for £5.14bn.
The all-stock transaction will see IP shareholders own 66.3% of the combined entity, with Smith shareholders holding the remaining 33.7%.
As part of the deal, IP agreed to pay 0.1285 new International Paper share for each Smith share.
The terms of the deal value Smith at 415p per share, based on the prices as of 25 March this year.
The new shares issued to Smith shareholders will be listed on the New York Stock Exchange, US, with IP also seeking a secondary listing on the London Stock Exchange, UK.
IP chair and CEO Mark Sutton said: “Combining with DS Smith is a logical next step in IP’s strategy to drive profitable growth by strengthening our global packaging business.
“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.”
The merger is anticipated to bring together Smith’s European sales of $9.4bn with IP’s $1.5bn in sales in the region in financial year 2023.
DS Smith’s complementary box network will also expand IP’s business in North America’s eastern region.
The integration of Smith’s containerboard capacity with the IP mill system is expected to increase the combined integration rate to approximately 90%.
The combined entity, to be headquartered in Memphis, Tennessee, US, is projected to achieve at least $514m in pretax cash synergies annually by the end of the fourth year following the completion of the merger.
The acquisition is expected to close by the fourth quarter (Q4) of 2024, pending approvals from shareholders of both companies and regulatory clearances in Europe and the US.
Following the closure, Andrew Silvernail will become CEO of the combined company while Miles Roberts will continue to serve as a consultant to facilitate integration.
Smith CEO Miles Roberts said: “The combination with IP is an attractive opportunity to create a truly international sustainable packaging solutions leader that is well positioned in attractive and growing markets across Europe and North America.”
