EU Grants Conditional Approval for International Paper’s $7.16 Billion Acquisition of DS Smith
In a significant development within the packaging industry, the European Union (EU) has granted conditional approval for International Paper Co.‘s proposed $7.16 billion acquisition of DS Smith Plc. This decision comes after International Paper agreed to divest specific assets to address the EU’s competition concerns.
Background of the Acquisition
In April 2024, Memphis-based International Paper, a leading global producer of renewable fiber-based packaging and pulp, announced its intention to acquire London-listed DS Smith, a prominent provider of sustainable packaging solutions operating in over 30 countries. The merger aims to enhance International Paper’s presence in the European market, aligning with the industry’s trend toward consolidation.
EU’s Antitrust Review and Concerns
The European Commission, responsible for assessing mergers to prevent anti-competitive practices, initiated a thorough review of the proposed acquisition. The investigation identified potential competition issues in specific regional markets:
- Corrugated Sheets: Concerns were raised about reduced competition in the manufacture and supply of corrugated sheets in northern and western Portugal.
- Heavy-Duty Corrugated Sheets: Potential monopolistic scenarios were identified in northeast Spain.
- Corrugated Cases: The merger could significantly impact competition in the northwest France market.
The Commission’s analysis suggested that the merger, as initially proposed, could lead to higher prices and reduced choices for businesses relying on these packaging products.
Proposed Remedies and Commitments
To alleviate these concerns, International Paper offered binding commitments to divest five of its plants in Europe:
- France: Three plants located in the Normandy region.
- Portugal: One box plant situated in Ovar.
- Spain: One box plant based in Bilbao.
These divestitures are designed to eliminate the overlapping operations that raised competition issues, thereby maintaining a balanced market landscape in the affected regions.
Commission’s Decision and Next Steps
On January 24, 2025, the European Commission announced its conditional approval of the acquisition, stating that the proposed divestitures “fully address the competition concerns identified.” The Commission will oversee the process to ensure that the divested assets are sold to suitable purchasers, a prerequisite before International Paper can finalize the acquisition.
International Paper’s CEO, Andy Silvernail, expressed confidence in the outcome, noting, “While we would have preferred to keep the selected locations as part of our portfolio, these are attractive sites, and we are confident we will find a suitable buyer.” He emphasized that the merger would position the combined entity as a global leader in sustainable packaging solutions, particularly in the North American and EMEA (Europe, Middle East, and Africa) regions.
Industry Implications
This merger reflects the ongoing consolidation within the packaging industry, driven by the demand for sustainable and efficient packaging solutions. The combined resources and expertise of International Paper and DS Smith are expected to foster innovation and enhance service offerings to a diverse clientele, including major corporations like Amazon and Unilever.
The transaction, structured as an all-share deal, has already received approval from shareholders of both companies. With the EU’s conditional clearance, the acquisition is poised to proceed, pending the successful divestiture of the specified assets and final regulatory approvals.