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International Paper Announces Agreement to Acquire DS Smith

MEMPHIS, Tenn. (News release) -- International Paper and DS Smith Plc announced that they have reached agreement on the terms of a recommended all-share combination (the "Combination"), creating a truly global leader in sustainable packaging solutions.

The terms of the Combination value each DS Smith share at 415 pence per share1, and will result in IP issuing 0.1285 shares for each DS Smith share, resulting in pro forma ownership of 66.3 percent for IP shareholders and 33.7 percent2 for DS Smith shareholders, implying a transaction value of approximately $9.9 billion3. The Combination is expected to close by the fourth quarter of 2024.

"Combining with DS Smith is a logical next step in IP's strategy to drive profitable growth by strengthening our global packaging business," said Mark S. Sutton, Chairman and CEO of IP. "DS Smith is a leader in packaging solutions with an extensive reach across Europe, which complements IP's capabilities and will accelerate growth through innovation and sustainability. We are confident this combination will drive significant value for our employees, customers, and shareholders."

CEO-Elect of IP, Andrew K. Silvernail added, "Bringing together the capabilities and expertise of both companies will create a winning position in renewable packaging across Europe, while also enhancing IP's North American business. I firmly believe this strategic combination offers a unique and highly compelling opportunity to create tremendous shareholder value. I am also committed to working with the teams to deliver the expected synergies, along with the ongoing profit improvement initiatives across the IP portfolio."

CEO of DS Smith, Miles Roberts, said, "The combination with IP is an attractive opportunity to create a truly international sustainable packaging solutions leader that is well positioned in attractive and growing markets across Europe and North America. It combines two focused and complementary businesses. DS Smith has grown significantly through a dedication to customers, focus on innovation, quality of packaging and high levels of service. In a dynamic sustainable packaging landscape, the combination will enhance our global proposition to customers, create opportunities for colleagues and drive value for shareholders who can remain fully invested in such an exciting business. I am proud of all that DS Smith has achieved to date and am sure that the business will continue to flourish as part of a combined group with IP due to the capability and continued commitment of our colleagues."

Compelling Strategic Opportunity

  • Creates a global leader in sustainable packaging solutions, focused on the attractive and growing North American and European regions
    • Establishes a differentiated corrugated packaging company with approximately 90% of revenue from sustainable fiber-based packaging.
    • Expands IP's footprint and capabilities in the attractive European region.
      • Combines DS Smith's extensive European sales of $9.4 billion4 in FY23 with IP's European sales of $1.5 billion in FY23.
    • Enhances IP's business in North America's eastern region with the addition of DS Smith's complementary box network.
  • Complementary business models increase vertical integration to improve profitability
    • Integration of approximately 500-600k tons of containerboard from DS Smith into the IP mill system will increase the combined integration rate to approximately 90%.
    • Optimizes the combined network of mills, box plants, and supply chains.
  • Strengthens customer value proposition through enhanced offerings, innovation, and geographic reach
    • Enhances ability to serve global customers with a highly complementary, quality portfolio and broader product offerings.
    • Increases exposure to the attractive, fast-moving consumer goods and e-commerce segments.
    • Greater opportunity for cross-selling products and services across respective regional and global customers.
    • Combines market and commercial expertise, and innovation capabilities.
    • Generates revenue synergies primarily from incremental sales generated by DS Smith's Innovation Network being extended to IP's European customers.
  • Accelerates sustainability, including through innovation, for the benefit of all stakeholders
    • Combines IP and DS Smith's experienced management teams to accelerate innovative sustainable solutions and advance the circular economy.
    • Expands a portfolio of sustainable products to meet customers' evolving preferences.
    • Aligns commitment to grow responsibly through environmental stewardship, community engagement, and strong corporate governance.
  • Similar cultures and experienced teams ensure low integration and operational risk
    • Shared purpose-driven cultures with a relentless focus on sustainability, responsible growth, positively impacting communities and a commitment to creating innovative solutions that meet customer needs.
    • Intention to retain DS Smith's London headquarters as IP's new EMEA headquarters.
    • Both the IP and DS Smith teams, including IP CEO-Elect Andrew K. Silvernail, have expertise and experience in successfully integrating large scale acquisitions.

Significant Value Creation

  • Substantial synergies through global scale and optimization
    • Expected to deliver at least $514 million of pre-tax cash synergies on an annual run-rate basis by the end of the fourth year following the close of the Combination, comprised of the following:
      • 92%, or $474 million per annum of cost synergies, across the following sources:
        • 47%, or $241 million from operational synergies across the combined network of mills, box plants, and global supply chain, including:
          • Integration benefit of balancing containerboard supply positions (approximately 500 to 600k tons);
          • Freight optimization benefits; and
          • Operational efficiencies across mill and box network from product and system optimization, and sharing technology expertise.
        • 23%, or $117 million from overhead synergies by reducing duplicative corporate and business overhead expenses; and
        • 23%, or $116 million from operational procurement synergies from increased scale of the combined company.
      • 5%, or $26 million from capex procurement synergies, by leveraging increased scale of the combined company; and
      • 3%, or $14 million of revenue synergies.
    • All potential synergies have been independently validated as part of a Quantified Financial Benefits Statement under Rule 28.1(a) of the UK Takeover Code (the "Code").
    • These synergies are expected to arise as a direct result of the Combination and could not be achieved independently of the Combination.
    • IP anticipates that the total costs to achieve the synergies would be approximately $370 million.
    • IP expects that approximately 33% of the synergies would be achieved in year one, with approximately 66% achieved in year two and 95% achieved in year three following close of the transaction, all on a run-rate basis.
    • Aside from the one­time costs referred to above, no material dis­synergies are expected as a direct result of the Combination.
  • Strong pro forma financial profile will enable accelerated growth
    • Pro forma 2023 combined revenues of approximately $28.2 billion5 and combined adjusted EBITDA of approximately $4.1 billion6.
    • Expected to be EPS accretive in the first year following close of the transaction, reflecting synergies expected to be realized.
    • Return on invested capital from the Combination is expected to exceed IP's weighted average cost of capital by the end of the third year following close of the transaction.
    • Maintains strong balance sheet and expected to maintain IP's current credit rating.
    • Solid cash flow profile provides the financial strength needed to deliver profitable growth.
    • Expect to maintain IP's current dividend.
  • Creates greater liquidity for investors and a more diversified shareholder base
    • Primary listing on the New York Stock Exchange and a secondary listing on the London Stock Exchange.
    • Deeper liquidity as a result of improved position within the S&P 500 based on implied combined market capitalization.

Transaction Structure

The Combination will be structured as an acquisition of DS Smith by IP and implemented in accordance with the rules of the Code and English law. IP will issue 0.1285 for each DS Smith share, equal to 179,948,967 shares.

Upon completion of the Combination, any new IP Shares issued to DS Smith shareholders will be authorized for primary listing on the New York Stock Exchange subject to official notice of issuance. IP also intends to seek a secondary listing of its shares on the London Stock Exchange.

The Combination is expected to close by the fourth quarter of 2024, subject to IP and DS Smith shareholder approval and customary closing conditions, including receipt of regulatory clearances, in Europe and the U.S.

Governance and Leadership

Andrew K. Silvernail will be CEO of the combined company and Miles Roberts will be retained as a consultant to assist with integration matters. As part of the Combination, up to two non-executive directors of DS Smith will be invited to join the Board of the combined company upon close of the Combination.

The combined company will be headquartered in Memphis, Tennessee, with plans to establish an EMEA headquarters at DS Smith's existing London headquarters.

For the full Rule 2.7 Announcement (the "Announcement"), a copy of this press release and further information, please visit the dedicated transaction microsite here.

Investor Webcast

IP will host a webcast today at 1:00 p.m. GMT/8:00 a.m. ET/7:00 a.m. CT. All interested parties are invited to listen to the webcast via IP's website at http://www.internationalpaper.com by clicking on the Investors tab and going to the Events & Presentations page. An investor presentation will also be filed and available on the investor relations page. A replay of the webcast will be on the website beginning approximately two hours after the call. Parties who wish to participate in the webcast via teleconference may dial (844) 291-6360 and outside the U.S. +1 (234) 720-6993, and ask to be connected to the IP Investor Call. The conference ID number is 7865078. An audio-only replay will be available for four weeks following the call. To access the replay, dial (866) 207-1041 or +1 402-970-0847 and when prompted for the conference ID, enter 9511554.


BofA Securities, Inc. is acting as sole financial advisor to IP. Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal adviser to IP in connection with the Combination. Sidley Austin LLP is acting as U.S. antitrust legal adviser to IP in connection with the Combination.

Goldman Sachs International, Citigroup Global Markets Limited, and J.P. Morgan Securities Plc are acting as financial advisors to DS Smith. Slaughter and May is acting as legal adviser to DS Smith in connection with the Combination. Sullivan & Cromwell LLP is acting as U.S. legal adviser to DS Smith in connection with the Combination.

About International Paper

International Paper (NYSE: IP) is a global provider of renewable fiber-based packaging and pulp products, and one of the world's largest recyclers. Headquartered in Memphis, Tenn., we employ approximately 40,000 colleagues globally who are committed to creating what's next. We serve customers worldwide, with manufacturing operations in North America, Latin America, North Africa, and Europe. Net sales for 2023 were $18.9 billion. Additional information can be found by visiting internationalpaper.com.

About DS Smith

DS Smith is a leading provider of sustainable fiber-based packaging worldwide, which is supported by recycling and papermaking operations. It plays a central role in the value chain across sectors including e-commerce, fast moving consumer goods, and industrials. Through its purpose of "Redefining Packaging for a Changing World" and its Now and Next sustainability strategy, DS Smith is committed to leading the transition to the circular economy, while delivering more circular solutions for its customers and wider society - replacing problem plastics, taking carbon out of supply chains, and providing innovative recycling solutions. Its bespoke box-to-box in 14 days model, design capabilities, and innovation strategy sit at the heart of this response. DS Smith operates in 34 countries employing around 30,000 people and is a Strategic Partner of the Ellen MacArthur Foundation.

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