DS Smith sells plastics division

DS Smith sells plastics division

U.K.-based packaging and paperboard maker sells plastics production assets to U.S.-based equity firm.

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London-based DS Smith Plc has agreed to sell its Plastics division to United States-based equity firm Olympus Partners for what it calls “an enterprise value of $585 million.”

According to DS Smith, the sale price “represents a multiple of 9.9 times EBITDA [earnings before interest, taxes, depreciation and amortization] based on the past 12 months to Oct. 31, 2018.” The transaction, subject to closing conditions including regulatory approvals, is expected to become final in the second half 2019.

The Plastics division of DS Smith consists of operations that produce flexible plastics, rigid plastics and foam products. “This sale represents an important step in DS Smith’s continued progress as a leader in sustainable packaging and accelerates the program of deleveraging, alongside organic cashflow,” states the firm.

DS Smith also has issued on update on other activities, stating that “in the period since Nov. 1 2018, trading has continued to be strong, in line with our expectations.” Adds the firm, “We continue to see good corrugated box volume growth with continued market share gains driven by the quality of our offering to large and e-commerce customers and our fast moving consumer goods (FMCG)-weighted customer base.”

The company also indicates its Christmas period was “especially busy for our e-commerce-focused customers, with our sector-leading offering supporting our customers over this critical period.”

DS Smith says of its late January acquisition of Spain-based Europac, “We are delighted to welcome our new colleagues to the business and are very pleased with the initial progress on integration and the customer reaction so far.”

The packaging and containerboard producers says its U.S. business “continues to perform well with strong margins and returns ahead of our acquisition case.”

Comments Miles Roberts, DS Smith’s group chief executive, “My colleagues in the Plastics division have worked hard to build the business into the success that it is today, and that quality has been recognized by Olympus Partners. The [Plastics division sale] is attractive both financially and strategically for DS Smith as, together with the acquisition of Europac, we reinforce our position as a leader in sustainable packaging with a clear focus on our fiber-based business.”

He adds, “We are pleased with the performance of the business during the second half of the year. While macroeconomic conditions remain uncertain, we are confident of continued strong demand for our innovative and high-quality sustainable packaging and the resilience of our FMCG-focused customer base. At the same time, the sale announced today will further strengthen our robust balance sheet and the board of directors continues to view the prospects for the business with confidence.”