UK-based DS Smith has reached an agreement to acquire Spanish firm Europac for €1.66bn in a bid to strengthen its footprint in Western Europe.

Under the proposed acquisition, DS Smith will offer €16.80 for each Europac share.

DS Smith noted that the acquisition is complementary in nature and will give access to Europac’s diversified customer portfolio.

DS Smith group chief executive Miles Roberts said: “The acquisition of Europac is a very exciting development for DS Smith, strengthening our position as a leading global supplier of sustainable packaging solutions.

“This acquisition will enhance our customer offer in Western Europe, a key packaging growth region, and help us meet the rising demand for our high-quality packaging and sustainable products.

“DS Smith will raise funding for the deal through a fully underwritten £1bn rights issue.”

“It will also strengthen our global supply chain and means we can serve our, and Europac’s, customers better.”

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Last year, Europac reported revenues of €868m and earnings before interest, taxes, depreciation, and amortisation (EBITDA) of €158m.

The transaction also includes the company’s debt and is expected to offer annual run-rate pre-tax cost synergies of €50m and additional integration benefits.

DS Smith will raise funding for the deal through a fully underwritten £1bn rights issue, along with a new committed debt facility of €740m (£645m).

Once the deal has closed, the company is expected to have net debt to EBITDA of fewer than 2.5 times by the end of the current financial year.

Subject to shareholder and regulatory approvals, the transaction is scheduled for completion in the fourth quarter of this year.