Shareholders from both companies have approved International Paper’s acquisition of DS Smith, with the combination still expected to close in Q4 2024.
Mondi originally expressed interest in acquiring DS Smith in February 2024; the merger was expected to exceed €11.5 billion in value and result in an ‘industry leader’ for paper packaging in Europe.
An all-cash counterbid of over £5 billion (€5,827,700,000) was raised by International Paper shortly after, sparking a bidding war with Mondi. Shareholders were expected to own 33.8% of the combined group if the deal with International Paper went ahead, as opposed to the 46% they would hold under Mondi.
Rumours arose in May that Suzano might disrupt the deal with an all-cash acquisition of International Paper, potentially even raising its offer by a ‘few dollars’ per share over time. This would have required International Paper to walk away from its agreement with DS Smith – but Suzano backed out after International Paper ‘did not engage’ with the $15 billion offer.
Ultimately, International Paper agreed to an all-share combination with DS Smith. The agreement is focused on the European and North American regions and aims to establish a differentiated corrugated packaging company with 90% of revenue from fibre-based packaging.
Now International Paper plans to publish a Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission (SEC), reporting the results of the final vote in the special shareholder meeting. As before, the combination is set to close in Q4 2024, subject to regulatory clearance and other customary closing conditions.
A statement from DS Smith on X read: “Following a successful DS Smith shareholder vote, the approval of International Paper’s shareholders has also been obtained. We believe the merger will create a global leader in sustainable packaging solutions. Work on the necessary regulatory approvals continues.”
“The overwhelming approval from both DS Smith and IP shareholders confirms the strong support of this combination,” commented Andy Silvernail, chairman and CEO of International Paper. “Bringing the two companies together will create a true global leader of sustainable packaging solutions which will drive significant value for our employees, customers and shareholders.”
The agreement is set to integrate around 500,000 to 600,000 tons of DS Smith containerboard into International Paper’s mill system. This is expected to raise the combined integration rate to around 90%.
Furthermore, it hopes to optimize a combined network of mills, box plants, and supply chains, and boost exposure to the e-commerce and fast-moving consumer goods (FMCG) segments. At the same time, it plans to commit to responsible growth through environmental stewardship, community engagement, and strong corporate governance.
At least $514 million (€472,387,394.22) is expected in pre-tax synergies on an annual run-rate basis by the end of the fourth year after the combination is closed. This includes $474 million (€435,625,729.30) in yearly cost synergies and $241 million (€221,479,000) from operational synergies across the combined network of mills, box plants, and the global supply chain.
Each DS Smith share is valued at 415 pence per share; International Paper plans to issue 0.1285 shares for each DS Smith share, resulting in pro forma ownership of 66.3% for International Paper shareholders and 33.7% for DS Smith shareholders. This indicates a transaction value of around $9.9 billion (€9,098,446,500).
Upon the combination’s completion, any new International Paper shares issued to DS Smith shareholders will be authorized for primary listing on the New York Stock Exchange subject to official notice of issuance. International Paper also plans to establish a secondary listing of its shares on the London Stock Exchange.
The combined company is set to be headquartered in Memphis, Tennessee, while DS Smith’s London headquarters will be dedicated to the combined company’s EMEA operations.
In similar news, Smurfit Kappa and WestRock agreed to a combination of their businesses in September 2023, with common stockholders of Smurfit Westrock expected to receive one new share and $5.00 in cash for each share of common stock.
We recently spoke to Saverio Mayer, CEO of Smurfit Westrock Europe MEA and APAC, about the industrial, financial, and efficiency benefits anticipated from the combination, and how this will translate into sustainability-minded packaging process. He expects this business move to create ‘unparalleled geographic and product diversity’, with new sustainability targets set to be developed for the future.
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