In a statement issued yesterday evening (26 March), US company International Paper confirmed that it has made an all-equity proposal to acquire the entire issued share capital of London-headquartered DS Smith.
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 (£32.33) at close of business on Monday (25 March), the terms of the proposal represent a value of 415p and premium of 48% to DS Smith’s undisturbed share price on 7 February 2024 of 281p per DS Smith share.
This was the day prior to the commencement of the offer period in respect of DS Smith, and just before the approach by Mondi was made public.
International Paper, which recorded net sales of around $18.9bn in 2023, said a combination between the two businesses would “create a truly global leader in sustainable packaging solutions that is well positioned in attractive and growing markets”.
It would significantly strengthen the combined corrugated packaging business in Europe with greater customer offerings; and create the opportunity to integrate the mill and box networks.
It would also balance the paper positions and optimise the supply chains of the respective companies in Europe and the US; “enhance value creating solutions for global customers in attractive fast-moving consumer goods and e-commerce segments”; and drive 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 would be created, the company added, while it said a deal would also result in a combined group with a strong balance sheet “that is expected to maintain an investment grade credit rating”.
International Paper said there could be no certainty that any offer would ultimately be made for DS Smith and that a further announcement would be made if and when appropriate.
In accordance with Rule 2.6(a) of the Takeover Code, International Paper is required, by not later than 5pm on 23 April 2024, to either announce a firm intention to make an offer for DS Smith in accordance with Rule 2.7 of the Code, or announce that it does not intend to make an offer.
In this case, the announcement would be treated as a statement to which Rule 2.8 of the Code applies. This deadline can be extended with the consent of the Takeover Panel in accordance with Rule 2.6(c) of the Code.
In its own statement yesterday, DS Smith said its board “acknowledges the strategic merits and potential for value creation through a combination with International Paper”. It confirmed it was also continuing discussions with Mondi regarding its own possible all share offer by the business for DS Smith.
Financial Times reported that International Paper’s proposal valued DS Smith at “roughly £6.8bn including debt”, compared to Mondi’s earlier offer that was agreed in principle that implied a value of 373p per DS Smith share, or closer to an enterprise value of £6.2bn.
DS Smith’s share price reached a 52-week high this morning of 391.80p, having climbed by nearly 9% on yesterday’s close. The 52-week low was 260.50p.
