DS Smith, which has invested £80M in acquisitions in the last 2.5 years, has further shaken up the UK corrugated market by announcing its proposed £170M acquisition of the Linpac Containers Group from Linpac Group Holdings.
The purchase which, due to its size, requires shareholder approval at a 22 March extraordinary general meeting, would make the company the UK’s largest corrugated packaging producer and significantly strengthen its European positions in corrugated and paper packaging. Funding is through existing debt facilities and a Royal Bank of Scotland loan, with the new debt to be reduced via a £71M rights issue.
The board of DS Smith, which produces 1.1bn m² of corrugated packaging annually at 25 UK and 12 continental European factories, and 1.2M tonnes of paper at six UK and three European mills, says the acquisition would give the company a broader customer base and a major presence in the “large and more resilient” FMCG segment of the corrugated packaging market.
It would also strengthen its position as a major corrugated case material supplier. Total synergies of £14.5M are expected in the second year of ownership.
Linpac Containers is the leading UK independent manufacturer of corrugated packaging, with an estimated 11% market share. In the year ended 31 December 2003 it had sales of £164M.
Having begun trading as a corrugated packaging supplier in Louth in 1959, the company has developed into a national player largely through organic expansion and today employs 1320 staff, producing 265 000 tonnes of paper and 550m² of packaging annually at eight UK factories.
Its owner Linpac Group Holdings was itself acquired by Montagu Private Equity last August.