Yesterday, International Paper announced that it had agreed to buy DS Smith, a British paper and packaging company, at a valuation of £5.8 billion (about $7.20 billion). Upon completion of the merger, DS Smith shareholders will own approximately 33.7% of the combined company, while International Paper shareholders will hold the remainder. In addition, International Paper plans to pursue a secondary listing on the London Stock Exchange.
FMCG understands that International Paper is a global supplier of renewable fibre packaging and pulp products, and one of the world's largest recyclers. Headquartered in Memphis, Tennessee, it employs approximately 40,000 people worldwide and is committed to creating the future. Serving customers worldwide, with manufacturing operations in North America, Latin America, North Africa, and Europe. Net sales in 2023 will be $18.9 billion.
DS Smith is the world's leading supplier of sustainable fibre packaging, supported by recycling and paper operations. It plays a central role in the value chain of industries such as e-commerce, FMCG, and industrial. Through its purpose to 'Redefine Packaging for a Changing World' and its sustainability strategy now and in the future, DS Smith is committed to leading the transition to a circular economy while providing customers and wider society with more circular solutions – replacing problem plastics, removing carbon from the supply chain, and providing innovative recycling solutions. Its customized box-to-box model, design capabilities, and innovation strategy in 14 days are at the heart of this response. With operations in 34 countries and approximately 30,000 employees, DS Smith is a strategic partner of the Ellen MacArthur Foundation.
DS Smith shareholders have been advised to support the transaction with International Paper. DS Smith recently received M&A proposals from International Paper and another company, but International Paper provided a more definitive offer. Each DS Smith share is valued at 415p and is expected to have 66.3% ownership by International Paper shareholders and 33.7% by DS Smith shareholders after the merger, with a total transaction value of nearly $9.9 billion.
The merger, which is expected to close in the fourth quarter of 2024, aims to create a true global leader in sustainable packaging solutions. Mark Sutton, chairman and chief executive officer of International Paper, said the merger is a strategic and desirable step to drive profit growth and will strengthen the company's position in the global packaging business. DS Smith, as a European leader in packaging solutions, and International Paper's footprint complement each other's footprint to accelerate growth through innovation and sustainability.
The combined company is expected to combine the capabilities and expertise of both companies to create a leading position in renewable packaging in Europe and strengthen International Paper's presence in North America. Andrew Silvernell, chief executive officer-designate at International Paper, said the strategic combination would bring unique advantages and was committed to delivering the expected synergies and continued margin improvement plans.
The strategic opportunities presented by the merger include a focus on attractive and growing North American and European markets, the establishment of a differentiated corrugated packaging company with a focus on sustainable fiber packaging, and the expansion of International Paper's footprint and capabilities in Europe. In addition, the merger will further strengthen the customer value proposition by adding vertical integration, optimizing the network, enhancing product innovation and geographic reach.
The combined company is expected to have revenue of approximately $28.2 billion and adjusted EBITDA of approximately $4.1 billion in 2023. Earnings per share are expected to be higher in the first year after the merger closes, reflecting the expected synergies. In addition, the combined company will maintain a strong balance sheet and plan for the financial strength needed to achieve profitable growth.
Upon completion of the merger, the new shares of International Paper issued to DS Smith shareholders will be listed primarily on the New York Stock Exchange and a secondary listing on the London Stock Exchange will be sought. The merger is expected to close in the fourth quarter of 2024, subject to shareholder approvals from both parties and the satisfaction of customary closing conditions in Europe and the United States, including regulatory approvals.