International Paper Announces Agreement to Acquire DS Smith
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International Paper (NYSE: IP, "IP") and DS Smith Plc (LSE: SMDS, "DS Smith") announced that they have reached agreement on the terms of a recommended all-share combination (the "Combination"), creating a truly global leader in sustainable packaging solutions.
The terms of the Combination value each DS Smith share at 415 pence per share1, 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 percent2 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."
CEO of DS Smith, 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. It combines two focused and complementary businesses. DS Smith has grown significantly through a dedication to customers, focus on innovation, quality of packaging and high levels of service. 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. I am proud of all that DS Smith has achieved to date and am sure that the business will continue to flourish as part of a combined group with IP due to the capability and continued commitment of our colleagues."
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.
- Accelerates sustainability, including through innovation, for the benefit of all stakeholders
- Combines IP and DS Smith's experienced management teams to accelerate innovative sustainable solutions and advance the circular economy.
- Expands a portfolio of sustainable products to meet customers' evolving preferences.
- Aligns commitment to grow responsibly through environmental stewardship, community engagement, and strong corporate governance.
- Similar cultures and experienced teams ensure low integration and operational risk
- Shared purpose-driven cultures with a relentless focus on sustainability, responsible growth, positively impacting communities and a commitment to creating innovative solutions that meet customer needs.
- 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.
Transaction Structure
The Combination will be structured as an acquisition of DS Smith by IP and implemented in accordance with the rules of the Code and English law. IP will issue 0.1285 for each DS Smith share, equal to 179,948,967 shares.
Upon completion of the Combination, any new IP Shares issued to DS Smith shareholders will be authorized for primary listing on the New York Stock Exchange subject to official notice of issuance. IP also intends to seek a secondary listing of its shares 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.
Governance and Leadership
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.
