IP, DS Smith agree to merger terms

International Paper (IP) and DS Smith PLC jointly have agreed to the terms of an all-share combination.

In a news release, Memphis, Tennessee-based IP says the merger will enable the creation of a "truly global leader in sustainable packaging solutions.” The combination will be structured as an acquisition of London-based DS Smith by IP.

DS Smith initially was approached earlier this year about being acquired by fellow U.K.-based paper and board firm Mondi PLC. Although those two companies also reached an agreement on terms, shortly after that announcement, IP entered the picture as a rival bidder.

If the most recent announcement prevails, IP will issue 0.1285 shares for each existing DS Smith share, resulting in pro forma ownership of 66.3 percent of the combined firm by IP shareholders and 33.7 percent by DS Smith shareholders.

The share values and number of shares issued would result in a transaction valued at approximately $9.9 billion, and the merger is expected to close by the fourth quarter of 2024.

"Combining with DS Smith is a logical next step in IP's strategy to drive profitable growth by strengthening our global packaging business,” IP Chair and CEO Mark S. Sutton says. “DS Smith is a leader in packaging solutions with an extensive reach across Europe, which complements IP’s capabilities and will accelerate growth through innovation and sustainability. We are confident this combination will drive significant value for our employees, customers, and shareholders.”

IP CEO-elect Andrew K. Silvernail would become CEO of the combined company after the merger, and DS Smith CEO Miles Roberts would be retained as a consultant to assist with integration matter, according to IP. The combined company would be headquartered in Memphis with plans to establish a Europe, Middle East and Africa (EMEA) region headquarters at DS Smith’s existing London headquarters.

“Bringing together the capabilities and expertise of both companies will create a winning position in renewable packaging across Europe, while also enhancing IP’s North American business," Silvernail says. "I firmly believe this strategic combination offers a unique and highly compelling opportunity to create tremendous shareholder value. I am also committed to working with the teams to deliver the expected synergies, along with the ongoing profit improvement initiatives across the IP portfolio.”

From IP’s perspective, the merger expands IP’s footprint and capabilities in the European region and creates a global leader in sustainable packaging solutions, focused on the growing North American and European regions. The deal also enhances IP’s business in North America’s eastern region with the addition of DS Smith’s complementary box network.

In the containerboard sector, the merger would result in the integration of up to 600,000 tons of recycled-content annual capacity from DS Smith into the IP mill system.

“The combination with IP 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,” Roberts says. “In a dynamic sustainable packaging landscape, the combination will enhance our global proposition to customers, create opportunities for colleagues and drive value for shareholders who can remain fully invested in such an exciting business.”

IP expects to retain the primary stock listing for the combined firm on the New York Stock Exchange and a secondary listing on the London Stock Exchange.

Although the companies anticipate the transaction can close by the end of this year, it is subject to IP and DS Smith shareholder approval and receipt of regulatory clearances in Europe and the United States.

In the case of the ongoing Smurfit Kappa Group and WestRock merger, which involved both a European and an American company, that merger was announced in September 2023 and just received European Commission approval in early April. Unlike Smurfit Kappa, DS Smith is not headquartered within the European Union.