DS Smith To Buy Europac In Major Packaging Deal

By Steve Wynne-Jones
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DS Smith To Buy Europac In Major Packaging Deal

UK-based packaging group DS Smith Plc has offered to buy Europac, valuing its Spanish rival at 1.9 billion euros as it looks to strengthen its business in western Europe in what would be its biggest ever acquisition.

"Europac's board of directors has confirmed that the acquisition is friendly and attractive," DS Smith said in a statement, adding that it had received undertakings to accept the offer from shareholders owning 58.97 percent of the company.

DS Smith said it planned to finance the deal by raising 1 billion pounds through the issue of new shares, plus a new debt facility of 740 million euros.

Share Boost

Shares of Europac were up 8 percent at 16.8 euros by 0725 GMT, exactly in line with DS Smith's offer price, while DS Smith was trading up 2.6 percent at a record 576.8 pence on Monday.

DS Smith also said it had initiated a strategic review of its plastics business as it looks to increase its focus on production of fibre products. Chief Executive Miles Roberts said it was too early to indicate conclusions of the review.


The offer price compares with Europac's Friday close of 15.58 euros, valuing Europac's equity at 1.67 billion euros. DS Smith also proposes to take on Europac debt, giving the deal a total value of 1.9 billion euros.

The deal is conditional on receiving acceptances from Europac shareholders representing at least 50 percent plus one share of Europac, regulatory approvals and the approval of DS Smith's shareholders, DS Smith said.

It said the undertakings of support it had received included certain members of the Isidro family, which owns around 42 percent of Europac.

Operating Synergies

Family member and Europac Executive Chairman José Miguel Isidro Rincón said in a statement: "I believe that the offer... would deliver important operating and commercial synergies for both companies."


DS Smith said the offer valued Europac at 8.4 times EBITDA (earnings before interest, tax, depreciation and amortisation) for the 12 months to March 31 2018, and said its offer represented a premium of about 7 percent to Friday's close.

Lighter Boxes

Roberts said the deal would cement DS Smith's number one position in France and make the group number two in Iberia, calling the strategic rationale "compelling".

Western Europe is the largest region and one of the fastest-growing for DS Smith, which employs a total of 26,000 people in Europe and has just entered the United States.

Roberts said there were many opportunities to improve efficiency at Europac, which employs 2,300 people across 23 locations, for example by reducing the weight of its cardboard boxes that are on average 20 percent heavier than DS Smith's.


DS Smith said it expected annual pretax cost savings of 50 million euros and further integration benefits, and saw no need for a major restructuring of Europac.

Roberts said there was be very little overlap between DS Smiths' and Europac's customers, meaning that he was confident of achieving regulatory clearance in the first phase of regulatory review.

DS Smith said it expected to have net debt to EBITDA of less than 2.5 times by the end of the current financial year, after completion of the deal, and remained committed to its medium-term target of 2.0 times.

It added that its group performance had continued to be in line with management expectations since the start of the current financial year.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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