International Paper 8-K Report, Corporate Update (Apr 4, 2024)

International Paper Company released an announcement on April 4, 2024, providing a further statement regarding its possible offer for DS Smith plc, under which International Paper would acquire the entire issued and to be issued share capital of DS Smith (the "Combination").

The company states that significant progress has been made in reciprocal due diligence and that it is now providing shareholders with more detail on the type and quantum of synergies it believes would arise. The Directors believe the Combined Group can deliver at least $514 million^a (£407 million) of pre-tax cash synergies on an annual run-rate basis by the end of the fourth year following completion, with $474 million of that from cost synergies and $14 million from revenue synergies. Total costs to achieve the synergies are estimated at approximately $370 million (£293 million).

The company expects the Combination to increase its margins and to be immediately earnings per share accretive, with return on invested capital expected to exceed its weighted average cost of capital by the end of the third year following completion. The combined group would be headquartered in Memphis, Tennessee, with a proposed European headquarters in London. Any new International Paper shares issued to DS Smith shareholders would be authorised for primary listing on the New York Stock Exchange, and the company intends to seek a secondary listing on the London Stock Exchange.

Under Rule 2.6(a) of the U.K. Takeover Code, International Paper must by 5.00 p.m. BST on April 23, 2024, either announce a firm intention to make an offer or announce that it does not intend to make one.

The announcement notes there can be no certainty that any transaction will proceed. Reports from Deloitte LLP and BofA Securities state the synergy statement was properly compiled and prepared with due care, though neither expresses an opinion on achievability.