International Paper has made an all-equity proposal to acquire the entire issued share capital of DS Smith, following on from Mondi’s previously reported offer.

Under the terms of the proposal, DS Smith shareholders would receive 0.1285 shares in International Paper for each share they own in DS Smith resulting in DS Smith shareholders owning approximately 33.8% of the combined group. Based on the International Paper share price of $40.85 at close of business on 25 March 2024, the terms of the Proposal represent a value of 415 pence and premium of 48% to DS Smith’s undisturbed share price on 7 February 2024 (being the day prior to the commencement of the offer period in respect of DS Smith) of 281 pence per DS Smith share.

International Paper has stated ‘compelling strategic and financial rationale’ for a combination between it and DS Smith, including:

  • Creating a global player in sustainable packaging options; positioned in attractive and growing markets;
  • A ‘significantly strengthened’ combined corrugated packaging business in Europe with greater customer offerings;
  • Creating the opportunity to integrate the mill and box networks, balance the paper positions, and optimise the supply chains, of the respective companies in Europe and the US;
  • Leveraging market expertise of two experienced and innovative management teams to further enhance innovation, solutions and sustainability products for all customers;
  • Enhancing value creating solutions for global customers in attractive fast-moving consumer goods and e-commerce segments;
  • Driving significant synergies including higher integration, commercial and operational improvements, and economies of scale across sourcing, supply chain and administration;
  • Significant value creation for both International Paper and DS Smith shareholders; and
  • Creating a combined group with a strong balance sheet that is expected to maintain an investment grade credit rating.

For its part, DS Smith has stated, ‘The board acknowledges the strategic merits and potential for value creation through a combination with International Paper. Accordingly, the board is progressing its discussions with International Paper regarding the proposal. There can be no certainty as to whether any offer will be made by International Paper or the terms of any such offer from International Paper.’

International Paper has likewise noted that, ‘There can be no certainty that any offer will ultimately be made for DS Smith. The International Paper board continues to consider M&A in a disciplined manner and believes an acquisition of DS Smith is aligned with International Paper’ strategy to enhance its corrugated packaging business in Europe and would create significant value for both International Paper and DS Smith shareowners.’

As previously reported, the respective boards of Mondi and DS Smith have reached an agreement in principle on the key financial terms of a possible all-share offer by Mondi for DS Smith, pursuant to which Mondi would acquire the entire issued and to be issued share capital of DS Smith.

The counterbid by International Paper opens up the prospect of a transatlantic multi-billion dollar bidding war for ownership of DS Smith.