International Paper to snap up DS Smith in £7.8bn deal

International Paper has agreed to buy British rival DS Smith in a £7.8bn all-share deal, it was confirmed on Tuesday.

In a joint statement, the US and UK companies said the combination would create “a truly global sustainable packaging solutions leader”, with industry-leading positions in both Europe and North America.

Under the terms of the recommended offer, DS Smith shareholders will receive 0.1285 new International Paper shares for each DS Smith share they hold.

Shares in the blue chip have been valued at 415p – based on the closing price of 25 March, the day before DS Smith first announced the offer – giving it an enterprise value of around £7.8bn.

The deal dwarfs an earlier offer from fellow UK rival Mondi, which had agreed an all-share takeover worth around £6.2bn in March, shortly before International Paper launched its own approach.

Miles Roberts, chief executive of DS Smith, said: “In a dynamic sustainable packaging landscape, the combination will enhance our global proposition to customers, create opportunities for colleagues and drive value for shareholders.”

Mark Sutton, chief executive of International Paper, said: “Combining with DS Smith is a logical next stop in International Paper’s strategy to drive profitable growth by strengthening our global packaging business.”

The Tennessee-based paper and pulp giant said it expected to achieve around $514m of pre-tax cash synergies on an annual basis after four years.

Once the tie-up is complete, DS Smith shareholders will own 33.7% and International Paper investors 66.3%. International Paper will also seek a secondary listing of its shares on the London Stock Exchange.

The deal is expected to close by the fourth quarter of this year.