DS Smith deal no longer in doubt

International Paper spurns Suzano; DS Smith shares jump

28 June 2024

Business

The new equipment will lower Kemsley mill’s freshwater use significantly — DS Smith operates the UK's largest recycled paper mill in Kemsley

Brazilian pulpmaker Suzano has terminated talks to buy American pulp and paper firm International Paper after failing to offer a high enough purchase price.

News agency Reuters, which broke the story, said the Brazilian pulpmaker – the world’s largest – had offered an all-cash deal of $15bn (£11.86bn) back in March.

The offer was unsuccessful, however, with Suzano revealing in filings on 26 June that it was unwilling to go any higher.

In a statement signed by Marcelo Bacci, the company’s chief financial and investor relations officer, Suzano said: “[Suzano] has reached what it believes to be the maximum price for the transaction to generate value for Suzano, without engagement from the other party, [International Paper].

“Therefore, in observance of its commitment to capital discipline, Suzano formalises that it will not pursue a transaction involving the acquisition of International Paper.

“It is important to emphasize that it has always been a condition of Suzano for the completion of this transaction that the engagement between the parties be based on private, confidential, and amicable terms. As it was not possible to proceed in this manner, Suzano has decided to terminate the negotiations.”

Shares in DS Smith – whose acquisition by International Paper was announced in April – have rallied in the two days following Suzano’s statement, as investors’ confidence in the DS Smith deal improve.

According to Reuters, a deal between Suzano and International Paper would have been conditional on it abandoning its £5.8bn bid for DS Smith.

Hovering around 369p on 26 June, DS Smith’s shares now trade around 418p (28 June), a jump of 13%.

Last week, DS Smith reported a fall in both its revenue and pre-tax profit while group chief executive Miles Roberts insisted the company’s sale to International Paper remained on track.

He said at the time: “In April, we announced a combination with International Paper through an all-share transaction. The combination with International Paper is an attractive opportunity to create a truly international sustainable packaging solutions leader that is well positioned in attractive and growing markets across Europe and North America. We are working collaboratively with International Paper to satisfy the offer conditions and bring about the successful completion of the transaction."