DS Smith boss insists £5.8bn takeover remains on track amid concerns over deal

The boss of packaging giant DS Smith has insisted the group is pressing ahead with its £5.8 billion sale to a US rival as speculation grows that the deal may be in jeopardy.

DS Smith – which counts customers including Amazon and consumer goods group Unilever – agreed an all-share takeover by Memphis-based International Paper in April, which would leave its shareholders with 33.7% of the combined group.

The deal will see International Paper seek a secondary listing of its shares on the London Stock Exchange following the takeover, which values each DS Smith share at 415p.

But International Paper is now reportedly fending off a possible 15 billion US dollar (£11.8 billion) takeover bid from Brazilian pulp and paper company Suzano.

It is thought Suzano’s potential offer is contingent on the DS Smith deal being abandoned.

Miles Roberts, chief executive of DS Smith, said he is aware of the rumoured bid interest in its buyer.

He stressed both sides are still “working very diligently on bringing the businesses together”.

He said they are continuing with plans to post deal documents for shareholders in August ahead of a vote in September.

“That hasn’t changed at all,” he said.

“Time will tell.

“We remain optimistic about the opportunities going forward.”

The comments came as DS Smith revealed annual profits falling by nearly a quarter, but it said sales are beginning to recover and it expects a boost from a surging paper prices.

The FTSE 100 group reported a 23% constant currency drop in pre-tax profits to £503 million for the year to April 30 as revenues fell 16% to £6.8 billion.

It follows a tougher year for the sector, which had seen packaging demand boom during the Covid years thanks to soaring online sales, only for this to unwind following the pandemic and as consumer demand waned amid surging inflation.

But the group said demand began to pick back up towards the end of its financial year, with like-for-like sales by volume recovering to grow by 2% in the final quarter.

It said the “positive trends” had continued into the new financial year and it expects packaging prices to rise, which will help buoy the second half of 2024-25.

Matt Britzman, equity analyst at Hargreaves Lansdown, said: “This was always going to be a challenging set of results for packaging giant DS Smith.

“The paper and packaging market hasn’t been kind.

“A mix of lower prices and soft user demand has hit the top line hard.

“The good news is that the outlook is improving, and trends toward the end of the year pointed to volume growth and the potential for price tailwinds later in the new year.

“Takeover talk is driving the stock and will continue to do so unless there’s a material change to the current deal with International Paper Company.

“But with the suitor subject to its own takeover speculation, there is reason to be cautious.”