What is International Paper proposing to do?

IP proposes to acquire the entire issued and to be issued share capital of DS Smith Plc in an all-stock transaction, implemented through a UK scheme of arrangement. DS Smith shareholders would receive 0.1285 of a new IP common share for each DS Smith share.

What conditions must be met before the deal closes?

Conditions include approval of the scheme by a majority in number of DS Smith shareholders voting, representing at least 75% in value of shares voted, sanction by the High Court of Justice in England and Wales, approval of the share issuance by IP stockholders, required antitrust and other regulatory approvals, and listing approvals on the NYSE and London Stock Exchange. The scheme must become effective by October 16, 2025.

What synergies and costs does management expect?

Management expects at least $514 million of pre-tax cash synergies on an annual run-rate basis by the end of the fourth year after closing, with about 33% achieved in year one, 66% in year two and 95% in year three. Total costs to achieve the synergies are estimated at approximately $370 million.

What payments could IP owe DS Smith if the deal fails?

Under the Co-operation Agreement, IP would pay DS Smith $220,527,460 if IP changes its recommendation to stockholders against the share issuance or the IP special meeting does not take place before the Long Stop Date; $147,018,306 if required clearances are not obtained or waived by the Long Stop Date; or $73,509,153 if IP stockholders do not approve the share issuance before the Long Stop Date and no recommendation change has occurred.

IP/INPAP 8-K: Material Agreements

01—Abstract

Summary

Summary of the 8-K filed April 16, 2024. Cited figures are marked; the original filing is the authoritative source.

International Paper Company, a New York corporation, announced on April 16, 2024 a recommended all-stock offer to acquire the entire issued and to be issued share capital of DS Smith Plc, a public limited company incorporated in England and Wales.

Each DS Smith share would be exchanged for 0.1285 of a new share of IP common stock, valuing each DS Smith share at 415 pence and implying an enterprise value of DS Smith of $9.9 billion^a. Pro forma, IP stockholders would own approximately 66.3% of the combined group and DS Smith shareholders approximately 33.7%. The transaction would be implemented by a court-sanctioned scheme of arrangement under the UK Companies Act 2006 and is expected to complete in the fourth quarter of 2024, subject to DS Smith shareholder and IP stockholder approvals, antitrust and other regulatory clearances, and NYSE and London Stock Exchange listing conditions.

The outside date for the scheme to become effective is October 16, 2025. The combined company would be headquartered in Memphis, Tennessee, with plans for an EMEA headquarters at DS Smith's London headquarters. Andrew K.

Silvernail would be CEO of the combined company, and Miles Roberts would act as a consultant to support integration. The companies entered into a Co-operation Agreement under which IP would determine the regulatory strategy and may not be required to divest any U.S. mill, plant or other asset. The agreement sets termination-related payments to DS Smith of $220,527,460,^b $147,018,306 or $73,509,153, depending on the circumstances.

The press release states that the combination is expected to deliver at least $514 million^c of pre-tax annual run-rate cash synergies by the end of the fourth year after closing, with approximately $370 million of one-time costs to achieve them. Pro forma 2023 combined revenues are stated as approximately $28.2 billion and combined adjusted EBITDA as approximately $4.1 billion, including projected synergies. IP expects the transaction to be EPS accretive in the first year after closing, to maintain its current credit rating and dividend, and to earn a return on invested capital above its weighted average cost of capital by the end of the third year after closing.

02—Key points

Key Highlights

Offer terms: 0.1285 IP common shares per DS Smith share, valuing each DS Smith share at 415 pence and implying a transaction value of about $9.9 billion.
Pro forma ownership: approximately 66.3% for IP stockholders and 33.7% for DS Smith shareholders.
Synergies: at least $514 million of pre-tax annual run-rate cash synergies by the end of the fourth year after closing, against approximately $370 million of one-time costs to achieve.
Financial profile: pro forma 2023 combined revenues of approximately $28.2 billion and combined adjusted EBITDA of approximately $4.1 billion including projected synergies; expected EPS accretion in year one.
Timing and conditions: expected completion in the fourth quarter of 2024, subject to shareholder approvals, regulatory clearances and listing conditions; scheme must become effective by October 16, 2025.
Governance and listing: Andrew K. Silvernail to be CEO, Memphis headquarters, EMEA headquarters in London, up to two DS Smith directors on the board, primary NYSE listing and planned secondary LSE listing.
Break-related payments: the Co-operation Agreement provides for payments to DS Smith of $220,527,460, $147,018,306 or $73,509,153 depending on the circumstances specified.

03—Questions

Frequently Asked Questions

What is International Paper proposing to do?
IP proposes to acquire the entire issued and to be issued share capital of DS Smith Plc in an all-stock transaction, implemented through a UK scheme of arrangement. DS Smith shareholders would receive 0.1285 of a new IP common share for each DS Smith share.
How will ownership of the combined company be split?
IP stockholders are expected to own approximately 66.3% of the combined group and DS Smith shareholders approximately 33.7%, based on diluted share capital figures stated in the filing.
What conditions must be met before the deal closes?
Conditions include approval of the scheme by a majority in number of DS Smith shareholders voting, representing at least 75% in value of shares voted, sanction by the High Court of Justice in England and Wales, approval of the share issuance by IP stockholders, required antitrust and other regulatory approvals, and listing approvals on the NYSE and London Stock Exchange. The scheme must become effective by October 16, 2025.
What synergies and costs does management expect?
Management expects at least $514 million of pre-tax cash synergies on an annual run-rate basis by the end of the fourth year after closing, with about 33% achieved in year one, 66% in year two and 95% in year three. Total costs to achieve the synergies are estimated at approximately $370 million.
What payments could IP owe DS Smith if the deal fails?
Under the Co-operation Agreement, IP would pay DS Smith $220,527,460 if IP changes its recommendation to stockholders against the share issuance or the IP special meeting does not take place before the Long Stop Date; $147,018,306 if required clearances are not obtained or waived by the Long Stop Date; or $73,509,153 if IP stockholders do not approve the share issuance before the Long Stop Date and no recommendation change has occurred.

04—Continue

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