The fate of DS Smith will become clearer by 23 April, the date that has been set for bids for the business to be tabled officially.
The future shape of the UK based international corrugated packaging business has been up for grabs since the start of March when the board of DS Smith agreed a deal with Mondi to create a “pan European industry leader in paper based sustainable packaging solutions”.
Under the terms of this agreed deal, shares of the two companies would be exchanged in a paper based deal valued at $5 billion. The proposal says that the deal would result in substantial synergistic savings. While this deal has been agreed between the two companies, the terms have not been formally presented to shareholders.
This has now provoked a response from US giant International Paper. It has put together a deal to buy the entire share capital of DS Smith with a promise of $514 million of synergies within the first four years of the merger being completed. It reckons that the cost of combining mills, box plants and optimising the supply chain would be $370 million, leaving money to be returned to shareholders.
International Paper already derives £1.2 billion in sales from corrugated across Europe. CEO elect of International Paper Andrew Silvernail says: “I believe the combination of International Paper and DS Smith would create a winning position in renewable packaging and would be a strong catalyst to drive profitable growth and create value. I am highly committed to delivering the expected synergies associated with this opportunity as well as the other profit improvement initiatives in place throughout the combined group.”
International Paper’s offer has not received the endorsement of DS Smith’s board, though it is no surprise as the board and management have been helping with the due diligence process.
Both bidders must now formalise their offers or else withdraw by St George’s Day under the rules of the Takeover Code.
