International Paper (IP) Makes Takeover Offer for DS Smith
International Paper Company IP has confirmed that it has made an all-equity proposal to acquire the entire issued share capital of DS Smith DITHF, valuing the British paper and packaging company at £5.7 billion ($7.2 billion). This move aligns with International Paper's strategy to bolster its corrugated packaging business in Europe. However, it has potentially sparked the possibility of a bidding war as Mondi Plc MONDY recently signaled interest in acquiring DS Smith for £5.1 billion.
Per International Paper’s proposal, DS Smith shareholders would receive 0.1285 shares in International Paper for each DS Smith share held. This will result in DS Smith shareholders owning approximately 33.8% of the combined entity.
Based on International Paper’s closing share price of $40.85 on Mar 25, 2024, the offer translates to £4.15 ($5.24) per share. It represents a 48% premium to DS Smith’s share price of £2.81 on Feb 7, 2024.
Notably, on Feb 8, Mondi confirmed that it is in the early stages of considering a possible all-share combination with DS Smith.
Based on Mondi’s closing share price of £13.81 per share on Feb 7, 2024, the proposal implies a value of £3.73 per DS Smith share and offers a premium of 33% to DS Smith’s closing share price of £2.81 per share on Feb 7. Mondi shareholders would own 54% and DS Smith shareholders would own the remaining 46% of the combined group.
DS Smith is a leading provider of sustainable packaging solutions, paper products and recycling services worldwide. It has a workforce of around 30,000 people in more than 30 countries.
The combination of International Paper and DS Smith would establish a global leader in sustainable packaging solutions that is well-positioned in attractive and growing markets. It will have a significantly stronger corrugated packaging business in Europe equipped with broader customer offerings.
The combination will create the opportunity to integrate both the companies’ mill and box networks and optimize the supply chains in Europe and the United States. It will leverage the market expertise of two experienced and innovative management teams to enhance innovation, solutions and sustainability products for customers.
The merger is expected to drive significant synergies including higher integration, commercial and operational improvements, and economies of scale across sourcing, supply chain and administration.
Price Performance
International Paper’s shares have gained 10.3% in the past year compared with the industry’s 38.2% increase.
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Zacks Rank & Stock to Consider
International Paper currently carries a Zacks Rank #3 (Hold).
A better-ranked stock from the basic materials space is Ecolab Inc. ECL, which sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Ecolab’s 2024 earnings is pegged at $6.39 per share, indicating an increase of 22.7% from the prior year’s reported number. It has an average trailing four-quarter earnings surprise of 1.7%. ECL shares have gained 43% in a year.
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D S SMITH (DITHF) : Free Stock Analysis Report
MONDI PLC UNS (MONDY) : Free Stock Analysis Report
