Packaging giant DS Smith has agreed to be acquired by US rival International Paper in a £5.8billion deal.
The two businesses said the tie-up would help create a major sustainable packaging company across Europe and North America and ‘optimise’ their mill networks, supply chains and freight costs.
Bosses at International Paper, one of the world’s biggest paper and pulp providers, also believe the takeover would produce at least $514million (£413million) in cost synergies within four years.
Snapping up: Packaging giant DS Smith has agreed to be acquired by US rival International Paper in a £5.8billion deal
DS Smith first received a bid from the Tennessee-based group last month, just a few weeks after it accepted a £5.1billion offer by fellow British packaging firm Mondi.
Under International Paper’s proposal, DS Smith shares are valued at £4.15 each, representing a premium of 47 per cent to their £2.81 closing price on 7 February.
If it is fully approved, DS Smith’s investors will own around one-third of the enlarged business, while International Paper shareholders will control the other two-thirds.
Mark S. Sutton, chair and chief executive of International Paper, said the takeover was ‘a logical next step’ in his firm’s strategy to ‘drive profitable growth.’
He added: ‘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.’
Founded in 1940 by two cousins, DS Smith supplies packaging to retail giants such as Amazon, Zalando, Tesco, Cadbury owner Mondelez, and home appliances maker Philips.
The FTSE 100 group employs around 30,000 people across more than 30 countries, including 4,750 in the UK.
Since 2020, the company’s growth has been uplifted by a Covid-induced boom in online shopping and higher selling prices for boxes, paper and recycling.
Its takeover represents another potential blow for the UK markets, which have lost several high-profile names to foreign buyers in recent years, such as Morrisons, G4S, Hotel Chocolat and Ted Baker.
Analysts have largely blamed this trend on the pound’s weakness since the European Union referendum and a perceived undervaluation of UK-listed shares.
However, International Paper said it plans to conduct a secondary listing of its shares on the London Stock Exchange and establish a European headquarters at DS Smith’s headquarters in the UK capital.
Danni Hewson, head of financial analysis at AJ Bell, said the move was a ‘positive step and good for the reputation of the UK stock market that a US firm sees value in having a London presence, even though this type of listing means it wouldn’t qualify for the FTSE 100.
‘International Paper might have also taken the view that offering UK-listed stock would help get the takeover over the line.’
DS Smith shares were 3.7 per cent lower at 394.6p on late Tuesday afternoon.
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