US-based packaging company International Paper has disclosed details on expected synergies from possible combination with British packaging company DS Smith.
Last month, the company proposed an all-equity transaction valued at $7.22bn (£5.7bn) for the entire issued share capital of DS Smith.
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International Paper anticipates achieving at least $514m in pretax cash synergies annually by the end of year four post-acquisition.
These synergies, largely from cost savings, are expected to stem from operational efficiencies, reduced overheads, and procurement benefits due to the increased scale of the merged entity.
The cost to realise these synergies is estimated at approximately $370m.
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The latest update from International Paper also includes plans to preserve key functions of DS Smith’s headquarters and to establish a European base at DS Smith’s current London location.
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By GlobalDataThis plan is subject to legal requirements and consultations with affected employees.
The US company intends to establish a European headquarters in London and pursue a listing of its shares in the city, contingent upon a successful acquisition.
Operations at DS Smith’s North American sites and International Paper’s European sites are expected to continue without interruption.
Despite the proposed combined group’s headquarters being in Memphis, Tennessee, at International Paper’s current headquarters, the company is seeking a secondary listing in London as part of its acquisition strategy.
New shares issued to DS Smith shareholders would be listed primarily on the New York Stock Exchange, pending official notice, International Paper said.
International Paper chairman and CEO Mark Sutton said: “Bringing International Paper together with DS Smith is a logical next step in International Paper’s strategy to create value by strengthening our packaging businesses in North America and Europe.
“By combining the strengths of both companies, we believe we can enhance our offering of sustainable packaging solutions for customers in attractive and growing markets.”
The transaction is subject to the UK Takeover Code, with International Paper having until 23 April 2024 to either announce a firm intention to make an offer or walk away.
The proposal comes closely after UK-based packaging company Mondi announced an agreement in principle for a potential all-share offer to acquire DS Smith for £5.14bn ($6.57bn).
