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International Paper (IP) Moves Closer to Acquiring DS Smith
IPInternational Paper(IP) ZACKS·2024-06-26 17:06

Group 1: Acquisition Details - International Paper Company (IP) has completed a significant milestone in its acquisition of DS Smith (DITHF) by expiring the mandatory 30-day waiting period under the Hart-Scott-Rodino Act, moving closer to finalizing the deal [1] - The acquisition is valued at approximately £5.8 billion (7.4billion)forDSSmith′sentireissuedsharecapital,withanenterprisevalueofaround£7.8billion(7.4 billion) for DS Smith's entire issued share capital, with an enterprise value of around £7.8 billion (9.9 billion) [2] - DS Smith shareholders will receive 0.1285 shares of International Paper for each share held, resulting in them owning about 33.7% of the combined entity [2] Group 2: Financial Impact and Synergies - The merger is expected to be accretive to IP's earnings in the first year and generate at least 514millioninpre−taxcashsynergiesannuallybytheendofthefourthyear[1]−Thecombinedcompanywillhaveproformaintegratedrevenuesofapproximately514 million in pre-tax cash synergies annually by the end of the fourth year [1] - The combined company will have pro forma integrated revenues of approximately 28.2 billion and an adjusted EBITDA of around 4.1billion[3]−Themergerisanticipatedtodrivesignificantsynergiesthroughintegration,operationalimprovements,andeconomiesofscaleacrossvariousfunctions[4]Group3:MarketPositionandStrategicBenefits−ThecombinationofInternationalPaperandDSSmithwillcreateagloballeaderinsustainablepackagingsolutions,enhancingtheircorrugatedpackagingbusinessinEurope[3]−Themergerwillallowfortheintegrationofbothcompanies′millandboxnetworks,optimizingsupplychainsinEuropeandtheUnitedStates[3]−Thedealpositionsthecombinedentitytoleveragetheexpertiseofbothmanagementteamstoenhanceinnovationandsustainabilityproductsforcustomers[3]Group4:IndustryContext−AnothernotablemergerinthepaperandpackagingindustryisbetweenWestRockCompany(WRK)andSmurfitKappaGroupPlc(SMFKY),expectedtocloseinJuly2024,creatingacompanyvaluedataround4.1 billion [3] - The merger is anticipated to drive significant synergies through integration, operational improvements, and economies of scale across various functions [4] Group 3: Market Position and Strategic Benefits - The combination of International Paper and DS Smith will create a global leader in sustainable packaging solutions, enhancing their corrugated packaging business in Europe [3] - The merger will allow for the integration of both companies' mill and box networks, optimizing supply chains in Europe and the United States [3] - The deal positions the combined entity to leverage the expertise of both management teams to enhance innovation and sustainability products for customers [3] Group 4: Industry Context - Another notable merger in the paper and packaging industry is between WestRock Company (WRK) and Smurfit Kappa Group Plc (SMFKY), expected to close in July 2024, creating a company valued at around 20 billion [4][5] - The WestRock and Smurfit Kappa merger is projected to yield annual pre-tax run-rate cost synergies exceeding $400 million in the first year post-completion [5]