London Calling: International Paper Eyes Secondary listing As Part Of Proposed DS Smith Combination

International Paper Company (NYSE:IP) shares are trading higher after it provided an update on its possible offer for DS Smith plc (OTC:DITHF).

International Paper confirmed significant progress in reciprocal due diligence as facilitated by the DS Smith Board and Management.

As part of the combination, International Paper intends to seek a secondary listing of its shares on the London Stock Exchange.

Mark Sutton, Chairman and CEO said, “Bringing International Paper together with DS Smith is a logical next step in International Paper’s strategy to create value by strengthening our packaging businesses in North America and Europe. By combining the strengths of both companies, we believe we can enhance our offering of sustainable packaging solutions for customers in attractive and growing markets.”

Synergies: International Paper expects the business combination to generate significant synergies and drive value creation for both companies’ shareholders.

The Directors expects the combined International Paper and DS Smith to deliver pre-tax cash synergies of at least $514 million (£407 million) on an annual run-rate basis by the end of the fourth year following completion of the combination.

Of this, $474 million (£376 million) of cost synergies is expected to be derived from the operational synergies across the combined network of mills, box plants, and global supply chain and reduction of duplicative corporate and business overhead expenses. 

International Paper anticipates the total costs to achieve the synergies to be about $370 million (£293 million).

The company projects about 33% of these synergies to be achieved by the end of the first year following completion, with roughly 66% and 95% achieved by the end of the second and third years, all on a run-rate basis, respectively.

The business combination is expected to boost International Paper’s margins through synergies and immediately accretive to EPS. 

As of December 31, 2023, cash and temporary investments stood at $1.11 billion.

 Investors can gain exposure to the stock via IShares Global Timber & Forestry ETF (NASDAQ:WOOD) and Invesco MSCI Global Timber ETF (NYSE:CUT).

Price Action: IP shares are up 0.91% at $39.42 on the last check Thursday.