Fredonia Analysts Discuss IP’s Agreement To Acquire DS Smith Packaging Industry Analyst Christine O’Keefe of Cleve- land, Ohio based The Fredonia Group says that the pur- chase of DS Smith by International Paper would widen IP’s lead in the global corrugated market, even after the pend- ing merger of Smurfit-Kappa and WestRock closes in July. DS Smith, a leading multinational paper packaging manufacturer, has been the subject of acquisition talks first with Mondi and then with International Paper since Febru- ary. 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, paper- board, 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 noted that the purchase price is nearly a 48 percent premium over the closing price of its stock on February 7, just be- fore Mondi expressed interest in acquiring the firm. Overall, global demand for corrugated boxes is fore- cast to increase 2.6 percent 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 increas- es its share of retail sales, with demand rising 10 percent annually. Demand will be driven by the US and the Asia/ Pacific region, which combined will account for 71 percent of absolute gains. Freedonia Corporate Research Analyst Joe Iorillo not- ed the complementary geographic operations of Interna- tional 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 percent of IP’s total sales, Europe and the Africa/Mideast region comprised only about 8 percent. By contrast, DS Smith has a more European-centered business; the UK and France alone combined to account for 30 percent of DS Smith's revenues in FY 2023, while only 8 percent 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, “Pri- or 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 percent of its revenues from North America in 2023, while nearly 75 percent of revenues came from Europe.” For more information, visit freedoniagroup.com .
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April 22, 2024
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