Yahoo Finance DS Smith boss defends £1.45bn move to buy Spanish rival
The chief executive of DS Smith has defended its decision to buy Spanish rival Europac for £1.45bn, suggesting that he has “unanimous support” from the company’s largest shareholders.
DS Smith announced on Monday that it had made an offer of €16.80 (£14.73) per share for Europac, valuing the deal at £1.45bn. The company will finance the transaction by raising £1bn through the issue of new shares, plus a new debt facility of £645m.
If the acquisition goes ahead, it will be the largest DS Smith has ever made and comes just a year after it announced plans to take its first step into the lucrative US packaging market by buying Interstate Resources for £722m.
But Mr Roberts said he had met more than half of the company’s shareholders in the past week and they were supportive of the move.
“The last sizable deal we did in Europe was five years ago, and since then it has been smaller and bolt-on acquisitions,” he said.
“This is in a home market - Europe - and it is products that we already understand. This is a very important deal, but it’s not half of the group or anywhere near that big.”
He said that shareholders had “put their trust in us” and that he would be working to deliver results as soon as possible. He admitted that the deal came very quickly after the Interstate acquisition, but said that the integration of the US business was “going better than expected”.
DS Smith, which makes cardboard packaging for companies including brewer Laithwaites and coffee giant Lavazza, would become the second largest business in its field in Iberia. It is subject to sign-off from the Spanish company’s shareholders.
Mr Roberts revealed that this was the third time that DS Smith had tried to buy Europac, whose largest shareholder is the Isidro family, which owns around 42pc of the business. "It is very much the right time for both us and Europac's owners," he said.
Trevor Green, head of UK equities at Aviva, which owned 7pc of DS Smiths’ shares, said he thought the deal came at an “opportune time”.
“Significantly integration in the US of Interstate Resources is going ahead of plan so it seems fair that the company turn their attention back to their historical home market of continental Europe for further M&A,” he said.
He added that DS Smith has had a strategy for around seven years to be a leading player in the consolidation of the European packaging market. The market has seen a boom in demand from internet retailers in particular, which are using more cardboard packaging to send goods to shoppers.
But analysts suggested that DS Smith could be overstretching itself.
Russ Mould, investment director at AJ Bell, said: “Companies which frequently make acquisitions face various risks including the tough job of successfully integrating businesses, making sure they haven’t overpaid and achieving the synergies first touted when making each acquisition.
Shares in the company were up 2.74pc to 577.8p on Monday morning.
