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January 17, 2012updated 26 Oct 2021 12:39pm

DS Smith to acquire SCA Packaging for €1.6bn

UK recycled packaging manufacturer DS Smith has signed a deal to buy SCA Packaging, part of Sweden's Svenska Cellulosa Aktiebolaget (SCA), for €1.6bn.

UK recycled-packaging manufacturer DS Smith is set to buy SCA Packaging, a division of Swedish Svenska Cellulosa Aktiebolaget (SCA), in a deal worth €1.6bn.

DS Smith said the acquisition, which excludes the kraftliner assets, will be financed through a combination of debt and £466m from a nine-for-eight rights issue at 95p a share.

The deal will merge the second and third largest packaging producers by volume in the European market, giving DS Smith a 14% share in a sector currently led by Irish firm Smurfit Kappa with 17%.

The deal will also deliver estimated pre-tax cost synergies from procurement and operational efficiencies of at least €75m per annum, in addition to cumulative capital expenditure and working capital benefits of at least €40m by the end of the third full financial year.

DS Smith chairman Gareth Davis said: “This acquisition is a unique opportunity, offering the combination of a clear strategic rationale, potentially excellent financial returns and a step change in DS Smith’s capabilities to deliver the recycled packaging service that our customers increasingly want on a pan-European basis.”

DS Smith Group chief executive Miles Roberts added that the transaction builds on the company’s strategy following the acquisition of French packager Otor. “SCA Packaging is a well invested business with long positions in recycling and packaging and short paper capacity that is very complementary to our strengths,” he said.

According to the company, SCA Packaging had net sales of €2.5bn in 2010.

The acquisition will require certain regulatory clearances and is expected to be complete during the second quarter of this year.

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