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DS Smith Acquires Europac for £1.45 Billion

DS Smith has announced its acquisition of leading European integrated packaging company Europac. Europac is a leading, Spanish-listed, approximately 42%.family-owned, vertically integrated packaging business. In 2017 it delivered revenues of £756 million and had EBITDA of £138 million.

DS Smith expects the acquisition will create significant value for customers and consistent and attractive returns for DS Smith shareholders. the company said it planned to finance the deal by raising £1bn through the issue of new shares, plus a new debt facility. Europac’s Board of Directors has confirmed that the acquisition is friendly and attractive, subject to fiduciary duties and to further assessment on the basis of the documentation to be prepared by DS Smith and to be approved by the CNMV, as well as taking into account any advice received from its legal or financial advisers.

DS Smith is expected to report its 2018 full-year results this month. As announced at the pre-close trading update on 1 May, the corrugated giant delivered strong performance in its financial year to 30 April 2018 with continuing box volume growth, successful ongoing input cost recovery and good momentum in all regions. Since the start of the current financial year, DS Smith’s group performance has continued to be in line with management expectations.

Since the completion of the acquisition of 80% of Interstate Resources in August 2017, the financial performance of the business has been materially better than the prior year with integration ahead of plan.

Miles Roberts, group chief executive, DS Smith, said: “The acquisition of Europac is a very exciting development for DS Smith, strengthening our position as a leading global supplier of sustainable packaging solutions.  We have a long-standing relationship with Europac, which is a company we have long admired, given the quality of their assets, employees and customers. This acquisition will enhance our customer offer in Western Europe, a key packaging growth region, and help us meet the rising demand for our high-quality packaging and sustainable products. It will also strengthen our global supply chain and means we can serve our, and Europac’s, customers better.”

“Along with improving our customer offer, this acquisition delivers value for our shareholders. We anticipate delivering attractive returns and significant synergies, which we have a strong track record of doing, as demonstrated by the successful acquisition of Interstate Resources. We look forward to working with the Europac team and further capitalising on increasing global customer demand for high quality, sustainable and engaging packaging,” added Roberts.

José Miguel Isidro Rincón, executive chairman, Europac said: “Europac is a great company, well structured, strongly positioned with its customers and has a great management team. Iberia is the third largest packaging market in Europe and has great growth potential. In my capacity as shareholder, I believe that the offer submitted by DS Smith, which upon implementation would result in a combination with Europac, would deliver important operating and commercial synergies for both companies.”

Commenting on the major  acquisition, Nicholas Mockett, head of packaging M&A, Moorgate Capital, said: “This is an important move for DS Smith filling in a major geographic region where the historic presence was not strong. In corrugated, more than other segments of the packaging industry, proximity to customers is important.

“The Enterprise Value to 2017 EBITDA is around 12 times, however factoring in the predicted synergies, it is 8.4 times 2018 LTM EBITDA, which is below DS Smith’s trading multiple and in-line with rivals such as Smurfit Kappa. The Spanish economy has been growing relatively strongly however unemployment remains high. Perhaps more interestingly for DS Smith, Spanish e-commerce has consistently been growing at 8-10% per annum in recent years, driving demand for packaging including corrugated.”

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