International Paper’s $7.2bn Bid for DS Smith Marks Milestone in Packaging Industry Consolidation

International Paper, a Tennessee-based titan in the paper and pulp sector, has made headlines with its recommended offer of $7.2 billion for DS Smith, a prominent player in the U.K. packaging industry. The deal, advised by legal powerhouse Skadden, represents a significant consolidation move within the global packaging landscape.

DS Smith, a constituent of the FTSE 100 index, is being represented by Slaughter and May in this transaction, showcasing the involvement of top-tier legal advisors on both sides. The all-share deal eclipses a previous offer of $6.4 billion put forward by Mondi, another U.K. rival, earlier in March 2024, underlining International Paper's strategic positioning in the market.

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The merger announcement comes amidst a resurgence in global M&A activity, fueled by an improved interest rate outlook, subdued inflation, and robust corporate earnings. According to data from LSEG, global M&A volumes surged by 38% in the first quarter of the year compared to 2023, reaching nearly $800 billion, although deals are facing heightened regulatory scrutiny, prolonging completion timelines.

Skadden, leading the pack in global M&A legal advisor rankings by deal value in the first quarter, brings considerable expertise to the table. Spearheaded by London-based corporate partner Ani Kusheva, the Skadden team boasts a lineup of seasoned professionals, including Bruce Embley, Lorenzo Corte, and Giorgio Motta, reflecting the firm's prowess in navigating complex cross-border transactions.

Kusheva's past involvement with International Paper on European deals, such as the acquisition of packaging businesses in France and Portugal from DS Smith in 2019, underscores her pivotal role in facilitating the current merger. Her prior representation of the company in the shelved $10.7 billion bid for Smurfit Kappa in 2018 further accentuates her deep-rooted connections within the industry.

Slaughter and May, represented by a team led by corporate partners David Watkins and Paul Dickson, bring their own wealth of experience to the table. Supported by a cadre of specialist partners, including Anna Lyle-Smythe, Phil Linnard, Azadeh Nassiri, Daniel Schaffer, and Mike Lane, the firm's involvement underscores its commitment to delivering comprehensive legal counsel to DS Smith.

The proposed merger between International Paper and DS Smith holds the promise of creating a global leader in sustainable packaging solutions, with a strategic focus on the North American and European markets. Anticipated cost savings of at least $516 million annually post-merger, coupled with plans for a secondary listing on the London Stock Exchange and retention of DS Smith's London headquarters, underscore the transformative potential of the deal.

With DS Smith shareholders set to own approximately 33.7% of the combined entity post-merger, the transaction heralds a new chapter in the evolution of the packaging industry, marked by heightened consolidation and strategic synergies.