DS Smith, which has invested in acquisitions in the past 2.5 years alone, has further shaken up the UK corrugated market by announcing its proposed acquisition of the Linpac Containers Group from Linpac Group Holdings for £170M in cash.
The purchase which, due to its size, requires shareholder approval at a March 22 EGM, 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 proposed 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 5M are expected in the second year of full financial 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 derived almost entirely from UK customers.
It employs 1320 staff, producing 265 000 tonnes of paper and 550M m2 of corrugated packaging annually at eight UK factories.
Linpac Group Holdings, whose eight divisions also include businesses not part of the sale making plastics films and packaging, automotive components, materials handling systems and mouldings, was itself acquired by Montagu Private Equity in August 2003.