EU Set to Approve International Paper's $7.1 Billion DS Smith Deal

In a major development, sources close to the matter have revealed that the European Union (EU) is poised to approve International Paper's acquisition of DS Smith, a deal valued at approximately $7.1 billion. This strategic move, first announced in April 2023, is expected to create a global leader in sustainable packaging solutions, with a strong presence in both Europe and North America.

International Paper, a global provider of renewable fiber-based packaging and pulp products, has agreed to acquire DS Smith, a leading European packaging company, in an all-share combination. The deal, which is subject to regulatory clearance and other customary closing conditions, is expected to close in the fourth quarter of 2024.

The acquisition is set to enhance International Paper's position in the European market, which is currently experiencing a trend of consolidation. By integrating around 500,000 to 600,000 tons of DS Smith containerboard into its mill system, International Paper aims to raise the combined integration rate to around 90%. This integration is expected to bring significant operational efficiencies and cost savings, contributing to the combined company's overall profitability and competitiveness.

In addition to the integration of containerboard production, the combined company plans to optimize its network of mills, box plants, and supply chains. This optimization is expected to lead to reduced freight costs and improved supply chain efficiency, enabling the company to better serve its customers in the e-commerce and fast-moving consumer goods (FMCG) segments. Furthermore, the combined company plans to commit to responsible growth through environmental stewardship, community engagement, and strong corporate governance.

The acquisition is expected to generate substantial synergies, with at least $514 million (€472,387,394.22) in pre-tax cash synergies on an annual run-rate basis by the end of the fourth year following the combination's closure. These synergies are expected to be derived from various key areas, such as operational synergies, cost synergies, and revenue synergies.

Upon the completion of the combination, any new International Paper shares issued to DS Smith shareholders will be authorized for primary listing on the New York Stock Exchange, subject to official notice of issuance. International Paper also plans to establish a secondary listing of its shares on the London Stock Exchange.

The combined company is set to be headquartered in Memphis, Tennessee, while DS Smith's London headquarters will be dedicated to the combined company's EMEA operations. This strategic move is expected to create a truly global leader in sustainable packaging solutions, focused on the attractive and growing North American and European regions.

In conclusion, the EU's approval of International Paper's acquisition of DS Smith is a significant step towards creating a global leader in sustainable packaging solutions. The combined company's focus on operational efficiency, cost savings, and responsible growth is expected to drive substantial synergies and enhance its competitive position in the e-commerce and FMCG segments. As an investor, this deal aligns with a steady performer and consistent growth philosophy, as it demonstrates a reliable and predictable return on investment over time.