DS Smith agrees takeover by US rival, but £5.8bn deal puts 400 roles at risk

DS Smith has agreed a takeover by International Paper

UK packaging giant, DS Smith, has accepted a £5.8billion takeover bid from a US rival after it won a battle to buy the firm.

In the all-share deal, Memphis-headquartered International Paper will end up with around 66.3% ownership of the unified group, while FTSE 100-listed DS Smith will retain 33.7%. This development comes as the American paper giant intervened and overshadowed a previously agreed-in-principle £5.1billion handshake between DS Smith and Londons home-grown challenger Mondi.

Post-acquisition, International Paper intends to seek a secondary listing of its shares on the London Stock Exchange, pricing each DS Smith share at 415p. However, it has sounded caution over job losses in back office positions across the blended workforce, with an initial estimate putting about 400 roles in the danger zone, is subject to closer examination.

It further clarified that this number represents approximately 0.6% of the combined worldwide staff strength, primarily targeting “corporate, head office and senior management positions across its and DS Smith’s respective businesses”. The majority of the affected roles are likely to be within corporate and administrative divisions, all part of an ambitious intent to salvage at least £413million in “synergies” post the buyout.

The companies refrained from disclosing the potential number of job cuts in the UK or specifically within DS Smith’s portfolio. International Paper said: “Aside from any potential headcount reduction resulting from the review… International Paper does not intend that the combination will result in substantial additional job losses including in frontline operational roles or mill or plant closures.”

DS Smith boasts a British workforce of 4,750 and a global one of 30,000. In contrast, International Paper employs approximately 40,000 worldwide, with 33,000 based primarily in the US. The company insinuated the larger corporation would find its base in their current Memphis office. Regardless, it wishes to retain “key elements” of DS Smith’s headquarters with a plan to make London the hub for its European HQ.

Andrew Silvernail, the imminent chief executive of International Paper, will lead the merged group, and the main US firm is anticipated to keep most of its leadership team. DS Smith’s chief executive, Miles Roberts, is set to remain as a consultant for up to two years following the deal’s finalisation.

Mr Roberts spoke favourably of the merger, stating: “The combination with International Paper is an attractive opportunity to create a truly international sustainable packaging solutions leader that is well positioned in attractive and growing markets across Europe and North America.”

Mr Silvernail agreed, commenting: “Bringing together the capabilities and expertise of both companies will create a winning position in renewable packaging across Europe, while also enhancing International Paper’s North American business.”

“I firmly believe this strategic combination offers a unique and highly compelling opportunity to create tremendous shareholder value. I am also committed to working with the teams to deliver the expected synergies, along with the ongoing profit improvement initiatives across the International Paper portfolio.”