The Freedonia Group's Packaging Industry Team of Analysts Discuss International Paper's Agreement to Acquire DS Smith

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 4^th 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.

SOURCE The Freedonia Group