MEMPHIS, Tenn. - International Paper Company (NYSE:IP) has made headway on its prospective acquisition of DS Smith plc, a move expected to significantly bolster its corrugated packaging business. The company projects at least $514 million in pre-tax cash synergies annually by the end of the fourth year post-acquisition.
The anticipated synergies, primarily cost savings, are envisaged across operational efficiencies, reduced overhead, and procurement advantages due to increased scale. These benefits are expected to arise directly from the merger, which would not be achievable independently. International Paper estimates the costs to achieve these synergies at around $370 million.
International Paper's Chairman and CEO, Mark Sutton, sees the acquisition as a strategic step to enhance their packaging offerings in North America and Europe. The incoming CEO, Andy Silvernail, also supports the move, emphasizing the potential for a strong position in renewable packaging and profitable growth.
The company is considering maintaining DS Smith's North American operations and establishing a European headquarters in London. Moreover, International Paper plans to seek a secondary listing of its shares on the London Stock Exchange, in addition to its primary listing on the New York Stock Exchange.
The transaction is subject to the U.K. Takeover Code, with International Paper having until 23 April 2024 to either announce a firm intention to make an offer or declare otherwise. This announcement is based on a press release statement and does not indicate a definitive intention to make an offer, leaving the potential for the transaction to proceed uncertain.
InvestingPro Insights
In the wake of International Paper Company's efforts to acquire DS Smith plc, the company's financial metrics and market performance provide a backdrop for investors to consider the potential impact of this strategic move. With a market capitalization of $13.52 billion, International Paper is poised to leverage its financial strength in pursuing the acquisition.
According to InvestingPro data, International Paper has a price-to-earnings (P/E) ratio of 46.88, which is high relative to the industry average, indicating investors may expect higher earnings growth in the future compared to competitors. The adjusted P/E ratio for the last twelve months as of Q4 2023 stands at a more moderate 19.85, suggesting a potentially more favorable valuation when considering normalized earnings.
InvestingPro Tips highlight that International Paper has been aggressively buying back shares and maintains a high shareholder yield, which could be attractive to investors looking for companies that actively return capital to shareholders. Furthermore, the company's commitment to dividend payments is evident, having maintained them for 54 consecutive years. This consistency in dividend payments underscores International Paper's financial resilience and dedication to shareholder returns.
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