DS Smith's Acquisition by International Paper: A New Chapter for the Packaging Industry

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In a significant strategic move, International Paper has announced its agreement to acquire DS Smith Plc, marking a pivotal moment in the packaging industry.

The acquisition, valued at approximately $9.9 billion, is set to create a global powerhouse in sustainable packaging solutions.

Mark S. Sutton, Chairman and CEO of International Paper, expressed the rationale behind the move, stating, "Combining with DS Smith is a logical next step in IP's strategy to drive profitable growth by strengthening our global packaging business." This sentiment was echoed by Andrew K. Silvernail, CEO-Elect of IP, who emphasized the creation of a winning position in renewable packaging across Europe and the enhancement of IP's North American business.

The CEO of DS Smith, Miles Roberts, lauded the opportunity, highlighting the creation of a truly international sustainable packaging solutions leader. The combination brings together two focused and complementary businesses, poised to capitalize on growing markets across Europe and North America.

The strategic benefits of the acquisition are numerous. It establishes a differentiated corrugated packaging company with a significant focus on sustainable fiber-based packaging, comprising approximately 90% of revenue. The combination also expands IP's footprint and capabilities in Europe, complementing DS Smith's extensive European sales.

Furthermore, the acquisition enhances IP's business in North America, particularly in the eastern region, through the addition of DS Smith's complementary box network. The integration of containerboard from DS Smith into the IP mill system will significantly increase the combined integration rate, optimizing the network of mills, box plants, and supply chains.

From a customer perspective, the acquisition strengthens the value proposition through enhanced offerings, innovation, and geographic reach. It provides greater exposure to fast-moving consumer goods and e-commerce segments, fostering cross-selling opportunities and revenue synergies.

Importantly, the acquisition aligns with both companies' commitment to sustainability. By combining resources and expertise, the aim is to accelerate innovation in sustainable packaging solutions and advance the circular economy. The shared cultures and experienced teams of IP and DS Smith mitigate integration and operational risks.

Financially, the acquisition is expected to deliver substantial synergies, with at least $514 million of pre-tax cash synergies anticipated on an annual run-rate basis within four years of closing the transaction. These synergies, validated independently, are expected to arise directly from the combination, with minimal dis-synergies expected.

The transaction structure entails IP issuing shares to DS Smith shareholders, with plans for primary and secondary listings on the New York Stock Exchange and the London Stock Exchange, respectively. Governance will see Andrew K. Silvernail leading the combined company as CEO, supported by Miles Roberts in a consultancy role for integration matters.

Overall, the acquisition of DS Smith by International Paper marks a significant milestone in the packaging industry, creating a global leader poised for sustainable growth and innovation. With a strong strategic rationale, compelling synergies, and a shared commitment to sustainability, the combined entity is set to redefine the landscape of the packaging industry for years to come.