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US-based International Paper has agreed to buy UK competitor DS Smith in a £7.8bn deal, trumping a bid from London-listed Mondi as consolidation across the paper and packaging industry accelerates.
The board of DS Smith on Tuesday recommended that shareholders accept a 415p a share offer from International Paper, which is headquartered in Memphis, Tennessee, and is listed in New York.
The announcement of the all-share deal comes less than a month after International Paper gatecrashed an existing deal that DS Smith had agreed with Mondi. Mondi’s offer valued DS Smith at roughly £6.2bn, including debt.
If DS Smith shareholders approve the deal they will own about a third of the combined group and International Paper investors will own the rest.
Miles Roberts, DS Smith chief executive, said: “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.”
The battle for DS Smith comes after the industry boomed during the pandemic, when lockdowns led to a surge in parcel deliveries, but has since faded and costs have remained high.
In the industry’s first big consolidation, Irish group Smurfit Kappa last September agreed a $20bn tie-up with US rival WestRock.
As part of the agreed deal between International Paper and DS Smith, the US company said it would seek a secondary listing of its shares on the London Stock Exchange.
The directors of DS Smith have given “irrevocable undertakings” to vote their shares in favour of the transaction, International Paper added.
“Combining with DS Smith is a logical next step in International Paper’s strategy to drive profitable growth by strengthening our global packaging business,” said Mark Sutton, chair and chief executive officer of International Paper.
International Paper has about 39,000 employees and generated about $18.9bn in net sales last year. The company previously bid for Smurfit Kappa in 2018 before dropping its pursuit after two offers were rejected.
International Paper said its offer represents a 48 per cent premium to the value of DS Smith’s shares on February 7, before the Mondi approach became public.
Shares in DS Smith were down 1.7 per cent at 403p on Tuesday.
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