International Paper provides update on acquisition offer for DS Smith

International Paper (IP) provided an update on its possible offer for DS Smith (DITHF) pursuant to which International Paper would acquire the entire issued and to be issued share capital of DS Smith. International Paper stated that significant progress has been made in reciprocal due diligence as facilitated by the DS Smith Board and Management, and provided shareholders with more detail on the type and quantum of synergies it believes would arise from the combination. Due diligence has confirmed International Paper’s belief that the combination will significantly strengthen the combined packaging business and customer offerings – with packaging representing 84% of International Paper’s current sales, approximately $1.5B of which is driven from European sales. Directors believe that the combined International Paper and DS Smith group can deliver at least $514M of pre-tax cash synergies on an annual run-rate basis by the end of the fourth year following completion of the combination. International Paper anticipates that the total costs to achieve the synergies would be approximately $370M. International Paper expects that approximately 33% of the synergies outlined above would be achieved by the end of the first year following completion, with approximately 66% and 95% achieved by the end of the second and third years following completion, all on a run-rate basis, respectively. Aside from the one off costs referred to above, the International Paper Board does not expect any material dis synergies to arise as a direct result of the combination. The combination is expected to increase International Paper’s margins through synergies and to be immediately EPS accretive. Return on invested capital from the Combination is expected to exceed International Paper’s weighted average cost of capital by the end of the third year following completion. DS Smith’s North American manufacturing locations and International Paper’s European manufacturing locations would continue their respective operations. Any new International Paper shares issued to DS Smith shareholders will be authorised for primary listing on the NYSE subject to official notice of issuance and International Paper intends to seek a secondary listing of its shares on the London Stock Exchange. International Paper is required, by not later than 5.00 p.m. London time on 23 April to either announce a firm intention to make an offer for DS Smith or announce that it does not intend to make an offer.