LONDON, UK:  International Paper Company and DS Smith Plc have agreed to a recommended all-share merger. This move will unite two complementary businesses, establishing a global leader in sustainable packaging solutions with strongholds in Europe and North America.

It is intended that the Combination will be implemented by way of a Court-sanctioned scheme of arrangement under Part 26 of the Companies Act.

The merger is poised to serve a diverse customer base across various growing markets, propelled by a shared commitment to sustainability. The combined entity will leverage its enhanced global reach in corrugated packaging solutions to deliver a broader range of products and choices to customers on both continents.

DS Smith shareholders are set to receive 0.1285 new International Paper shares for each DS Smith share they hold. The terms place the value of each DS Smith share at 415 pence, derived from International Paper’s closing share price of $40.85 and the £/US$ exchange rate of 1.2645 as of March 25, 2024.

The valuation pegs DS Smith’s fully diluted share capital at approximately £5.8 billion and its enterprise value at around £7.8 billion.

Upon completion, DS Smith shareholders will own about 33.7% of the new company, while International Paper shareholders will hold the majority stake of 66.3%. Additionally, International Paper plans to pursue a secondary listing of its shares on the London Stock Exchange, further cementing its global presence.

This strategic combination marks a significant step towards accelerating International Paper’s growth strategy and enhancing its global packaging business, promising a new era of innovation and customer-centric solutions in the packaging sector.

The International Paper Board believes the combination would be expected to deliver at least $514 million (£413 million) of pre-tax cash synergies on an annual run-rate basis by the end of the fourth year following the Effective Date; increase International Paper’s margins and to be earnings per share (EPS) accretive in year one. Return on invested capital (ROIC) from the Combination is expected to exceed International Paper’s weighted average cost of capital (WACC) by the end of the third year following the Effective Date; and result in a Combined Company with a strong balance sheet that is expected to maintain International Paper’s current credit rating.

Mark S. Sutton, Chairman and Chief Executive Officer of International Paper, said: “Combining with DS Smith is a logical next step in International Paper’s strategy to drive profitable growth by strengthening our global packaging business. DS Smith is a leader in packaging solutions with an extensive reach across Europe, which complements International Paper’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.”

Geoff Drabble, Chair of DS Smith, said: “The Board believes the combination with International Paper represents attractive value and creates a strong investment proposition for DS Smith shareholders in the global sustainable packaging industry. 

DS Smith is a high quality business with an excellent customer focus and exceptional people – this is recognised by this combination with International Paper and the strong interest in DS Smith.”

Miles Roberts, Group Chief Executive of DS Smith, 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. It combines two focused and complementary businesses.

DS Smith has grown significantly through a dedication to customers, focus on innovation, quality of packaging and high levels of service. 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”.

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