Under the offer, each of the DS Smith’s shares will be exchanged for 0.1285 shares of International Paper and the share exchange ratio will result in the British firm’s shareholders holding around 33.8% stake in the combined entity

International Paper

International Paper offers to acquire DS Smith in an all-stock deal. (Credit: Billy Hathorn/Wikimedia Commons)

American paper and pulp company International Paper has confirmed making an offer to acquire British packaging company DS Smith in an all-stock deal valuing the latter at £5.72bn.

As per the terms of the proposal, each of the DS Smith’s shares will be exchanged for 0.1285 shares of International Paper, which is listed on the New York Stock Exchange (NYSE).

The share exchange ratio will result in DS Smith’s shareholders holding around 33.8% stake in the combined entity.

DS Smith is listed on the London Stock Exchange.

The closing price of International Paper’s shares on 25 March 2024, at $40.85, indicates that the proposal’s terms represent a value of 415p for DS Smith. This represents a premium of 48% over DS Smith’s undisturbed share price on 7 February 2024, which stood at 281p per share, the day before the offer period began.

International Paper’s offer follows Mondi’s bid of £3.73 per share or £5.14bn to DS Smith, which was made earlier this month.

Under Mondi’s proposal, its shareholders will own 54% and DS Smith shareholders will retain the remaining 46% stake in the enlarged packaging company.

The British packaging firm said that it is continuing discussions with Mondi regarding the latter’s bid amid the offer from International Paper.

According to International Paper, its business combination with DS Smith will create a global major to cater to consumer goods and e-commerce sectors with sustainable packaging solutions.

It will also bolster the combined European corrugated packaging business with more customer offerings.

Additionally, the potential acquisition will integrate the mill and box networks, balance the paper positions, and streamline the supply chains, of the respective packaging firms in Europe and the US.

International Paper and DS Smith are expected to use each other’s management teams to further improve innovation, solutions, and sustainability products for all clients.

Furthermore, the acquisition will result in higher integration, commercial and operational improvements, and economies of scale across sourcing, supply chain and administration, said International Paper.

DS Smith stated: “The Board acknowledges the strategic merits and potential for value creation through a combination with International Paper.

“Accordingly, the Board is progressing its discussions with International Paper regarding the Proposal. There can be no certainty as to whether any offer will be made by International Paper or the terms of any such offer from International Paper.”