DS Smith Acquisition: Key Details, Impact, and What Comes Next

International Paper's acquisition of DS Smith marks a significant consolidation in the sustainable packaging industry. This all-share combination, valued at approximately $9.9 billion, aims to enhance market presence in North America and Europe. The merger is expected to drive innovation, achieve substantial synergies, and strengthen the companies' commitment to sustainability.

What Is DS Smith?

Founded in 1940, DS Smith specializes in packaging solutions, paper products, and recycling services. Its core offerings include retail and industrial packaging, specialty papers, and comprehensive recycling and waste management services. DS Smith differentiates itself through a strong focus on sustainability, leading in circular economy practices, and continuous innovation in packaging solutions. The company provides end-to-end services, from packaging to recycling, with a global reach and strategic investments enhancing its manufacturing and innovation capabilities.

Who Acquired DS Smith?

International Paper is a global leader in sustainable packaging solutions, pulp, and paper products. The company transforms renewable resources into essential products, emphasizing sustainability and innovation. Key offerings include corrugated packaging, fluff pulp, and specialized papers for industrial use. Additionally, International Paper provides comprehensive recycling services, integrating them into the global paper supply chain. Recognized for its Vision 2030 initiative, the company holds a strong market position, driving sustainability and environmental conservation efforts.

When Was DS Smith Acquired?

International Paper announced its agreement to acquire DS Smith on April 16, 2024. The acquisition is expected to close by the fourth quarter of 2024. This timing aligns with a broader industry trend towards consolidation and a heightened focus on sustainable packaging solutions. The move comes as major players in the packaging industry seek to expand their market share and capabilities, reflecting the increasing emphasis on environmental stewardship and the circular economy.

Why Was DS Smith Acquired?

• Market Expansion: The acquisition significantly enhances International Paper's geographic reach, particularly in Europe and North America. By integrating DS Smith's extensive network of box plants and recycling facilities, International Paper can better serve the fast-growing e-commerce and fast-moving consumer goods (FMCG) sectors.
• Technology Integration: International Paper stands to benefit from DS Smith's advanced containerboard technology. The integration of approximately 500,000 to 600,000 tons of DS Smith's containerboard into International Paper's mill system will optimize production and supply chain efficiencies, raising the combined integration rate to around 90%.
• Competitive Advantage: The merger strengthens International Paper's position as a global leader in sustainable packaging solutions. The combined entity will leverage $514 million in annual pre-tax synergies, enhancing its value proposition through cost savings, operational efficiencies, and a broader product offering. This strategic move positions the company to better compete in the evolving packaging market.

Acquisition Terms

• Acquisition Price: The transaction values DS Smith at approximately $9.9 billion.
• Payment Method: The acquisition will be executed through an all-share combination. International Paper will issue 0.1285 shares for each DS Smith share.
• Key Conditions or Agreements:
  • The combination is expected to close by the fourth quarter of 2024.
  • The transaction is subject to approval by both International Paper and DS Smith shareholders.
  • Customary closing conditions, including receipt of regulatory clearances in Europe and the U.S., must be met.
  • The European Commission's Phase I clearance is conditional on International Paper divesting certain box plants in France, Portugal, and Spain.
  • The combined company will be headquartered in Memphis, Tennessee, with plans to establish an EMEA headquarters at DS Smith's existing London headquarters.
  • Expected pre-tax synergies of at least $514 million on an annual run-rate basis by the end of the fourth year after the combination is closed.
  • New International Paper shares issued to DS Smith shareholders will be authorized for primary listing on the New York Stock Exchange and a secondary listing on the London Stock Exchange.
  • Andrew K. Silvernail will be the CEO of the combined company, and Miles Roberts will be retained as a consultant to assist with integration matters.
  • Up to two non-executive directors of DS Smith will join the Board of the combined company upon the close of the combination.

Impact on DS Smith

The acquisition of DS Smith by International Paper brings notable changes to its operations and management. The combined company will be headquartered in Memphis, Tennessee, with an EMEA headquarters in London. Andrew K. Silvernail will lead as CEO, while Miles Roberts will serve as a consultant. Additionally, up to two non-executive directors from DS Smith will join the board. The merger necessitates the divestment of five International Paper plants in Europe to meet regulatory conditions, ensuring competitive market dynamics in the region.

Product offerings and services are set to expand significantly. The merger aims to create a global leader in sustainable packaging, enhancing capabilities in North America and Europe. The integration of DS Smith's containerboard into International Paper's mill system will optimize production, raising the combined integration rate to around 90%. Employee reactions have been generally positive, with management highlighting the value creation for staff. Customers are expected to benefit from a broader product range and improved service, particularly in the fast-moving consumer goods and e-commerce sectors.

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