Citywire for Financial Professionals
Stay connected:

View the article online at http://citywire.co.uk/money/article/a558967

DS Smith doubles in size with £1.3bn SCA Packaging deal

DS Smith chief executive Miles Roberts unveils a 'transformational' acquisition for the FTSE packaging company and Citywire Top Stock.

 
DS Smith doubles in size with £1.3bn SCA Packaging deal

Last year provided disappointing on the mergers and acquisitions front but 2012 has got off to a cracking start.

Yesterday dairies group Robert Wiseman (RWD.L) agreed to a £280 million bid from German yogurt group Mueller. Today, it was a UK company doing the bidding as DS Smith, the packaging and recycled paper group unveiled a €1.6 billion (£1.35 billion) acquisition of the packaging arm of Sweden’s Svenska Cellulosa Aktiebolaget (SCA).

Shares in DS Smith (SMDS.L) closed 3.2% or 6.5p higher at 210p as analysts hailed the debt and equity funded deal as a ‘landmark’ and ‘transformational’ transaction that would more than double the size of the company.

SCA Packaging is Europe’s second largest packaging and the acquisition gives DS Smith access to 15 countries on the Continent it did not have before, although none, it stressed, in southern Europe.

Stockholm-listed SCA is selling the packaging operations to reinvest in its hygiene business. The division turned over €2.5 billion in 2010 and employs about 12,000 people.

Miles Roberts, DS Smith’s chief executive who has led the group's turnround in the past 18 months, said: ‘This is an exceptional opportunity to create value for shareholders by becoming the leading recycled packaging company across Europe – a company that will be better positioned to deliver even better service to our strong and growing FMCG [fast moving consumer goods] customer base.’

The SCA acquisition builds on the purchase of the Otor Group in 2010, which gave it a big market share of the French recycled corrugated packaging market. At the end of last year DS Smith sold Spicers, its office products wholesale business, for £200 million, considered a good price.

For the new transaction DS Smith plans to raise around £466 million from shareholders with a fully underwritten rights issue that will see 9 new shares created for every 8 held. The new shares will be priced at 95p, a 53% discount to last night’s closing price. The remaining £934 million will come from  new and existing bank credit facilities.

House broker JP Morgan Cazenove forecast the deal would increase DS Smith’s earnings per share by 18% in 2013 and by 23% in 2014 and generate at least €75 million in annual savings.

Standard Life, which owns 14.6% of DS Smith shares, has backed the deal. The company is in Citywire Top Stocks because of its top 10 position in the Standard Life Investments UK Equity Unconstrained fund, managed by Edward Legget.

DS Smith said current trading conditions remained broadly in line with the first nine months of its financial year. It said corrugated board prices had stabilised in the fourth quarter although volumes remained subdued in some markets.

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

The Citywire guide to investment trusts

In association with Aberdeen Asset Management

Fund managers from Standard Life Investments quizzed on investment trusts


What can SLI bring to the table for those who want to put their money into investment trusts?

More about this:

Look up the funds

Look up the shares

  • DS Smith PLC (SMDS.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Robert Wiseman Dairies Plc (RWD.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the fund managers

  • Edward Legget
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

More from us

Archive

Today's articles

Tools from Citywire Money

From the Forums

+ Start a new discussion

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add noreply@emails.citywire.co.uk to your safe senders list so we don't get junked.

Read more...

Woodford's new biotech could be the 'next Amgen'

by Gavin Lumsden on Nov 26, 2014 at 14:13

Sorry, this link is not
quite ready yet