DS Smith, a leading multinational paper
packaging manufacturer, has been the subject of acquisition talks
first with Mondi and then with International Paper since
February.
CLEVELAND, April 16,
2024 /PRNewswire/ -- On April
16, International Paper, a US-based leading multinational
paper packaging manufacturer, announced that there was an agreement
in place to purchase DS Smith, a UK-based leading
multinational paper, paperboard, and corrugated packaging
supplier.
The transaction, followed a bidding war with fellow UK-based
paper packaging leader Mondi, will be valued at approximately
$9.9 billion. This purchase is
expected to be completed by the 4th quarter of 2024. DS
Smith notes that the purchase price is nearly a 48% premium over
the closing price of its stock on February
7, just before Mondi first publicly expressed interest in
acquiring the firm.
According to Freedonia Packaging Industry Analyst Christine O'Keefe, "The purchase of DS Smith by
International Paper would widen IP's lead in the global corrugated
market, even after the pending merger of Smurfit-Kappa and WestRock
closes in July which would have surpassed IP's position alone."
Overall, global demand for corrugated boxes is forecast to
increase 2.6% per year to 296 billion square meters in 2027. Top
opportunities include the e-commerce market where demand for
corrugated boxes in 2022 reached levels that were nearly five times
demand levels in 2012. Growth will remain robust as e-commerce
increases its share of retail sales, with demand rising 10%
annually. Demand will be driven by the US and the Asia/Pacific region, which combined will
account for 71% of absolute gains.
Freedonia Corporate Research Analyst Joe
Iorillo noted the complementary geographic operations of
International Paper and DS Smith saying, "International Paper's
acquisition of DS Smith would give IP a much stronger presence in
the European market. In 2023, while the US accounted for 86% of
IP's total sales, Europe and the
Africa/Mideast region comprised
only about 8%. By contrast, DS Smith has a more European-centered
business; the UK and France alone
combined to account for 30% of DS Smith's revenues in FY 2023,
while only 8% were derived from the US."
However, if Mondi had succeeded in its bid to acquire DS Smith,
geographic operations would have remained heavily balanced toward
Europe. According to Iorillo,
"Prior to IP's agreement to buy DS Smith, Mondi had proposed to buy
the firm, a transaction which would have created a very large
European corrugated packaging entity but one lacking in a
substantial North American footprint. Mondi only generated about 8%
of its revenues from North America
in 2023, while nearly 75% of revenues came from Europe."
Packaging Analyst Mike Richardson
correctly observed in September 2023
when WestRock announced talks with Smurfit Kappa that the history
of the packaging industry shows that big acquisitions often don't
occur in isolation. Recalling the spurt of activity in 2019 around
the Berry Global-RPC and Bemis-Amcor combinations, he noted at that
time "This could set off some other merger and acquisition activity
in the paper packaging industry."
Following up now, Richardson commented, "Even though the
WestRock-Smurfit Kappa and IP-DS Smith moves will be the largest,
it seems likely that some of the other leading players will remain
in the mood to merge."
Jennifer Christ, manager of
Freedonia's consumer insights research, noted that the two
companies benefit as paper packaging industry makes a solid play
with sustainability in the mind of many consumers. She reported "In
general, consumers rank paper-based packaging options highest in
terms of perceived eco-friendliness. The materials benefit from the
fact that 77% of consumers consider buying products in packaging
that is recyclable or made with recycled content is important to
living a sustainable lifestyle, as found on the February-March
edition of The Freedonia Group National Online Consumer Survey.
Furthermore, 54% of consumers reported that they were more willing
to take action about sustainability, in their purchases and waste
habits, than they were last year."
Additional analysis of opportunities and trends in Freedonia's
report Global Corrugated Boxes. Coverage of this and other
areas in paper, paperboard, and corrugated packaging can be found
on the Freedonia Group Packaging Industry page.
About The Freedonia Group
The Freedonia Group,
a division of MarketResearch.com, is a premier international
business research company, providing clients with product analyses,
market forecasts, industry trends, and market share information.
From one-person consulting firms to global conglomerates, our
analysts provide companies with unbiased, reliable industry market
research and analysis to help them make important business
decisions. The Freedonia Group's brands also include Packaged
Facts, a trusted provider of consumer market research on food
& beverage, pet products and services, demographics, and
financial services, and Simba Information, the leading
authority for market intelligence and forecasts on the education
and professional publishing industries. Find off-the-shelf studies
at https://www.freedoniagroup.com/ or contact us for custom
research: +1 440.842.2400.
View original content to download
multimedia:https://www.prnewswire.com/news-releases/the-freedonia-groups-packaging-industry-team-of-analysts-discuss-international-papers-agreement-to-acquire-ds-smith-302118577.html
SOURCE The Freedonia Group