International Paper's $7.2 billion acquisition of DS Smith gets EU approval

Investing.com -- U.S.-based International Paper has received clearance from the European Union for its $7.2 billion acquisition of UK competitor DS Smith. The approval comes after International Paper agreed to sell assets to alleviate competition concerns.

The acquisition is part of International Paper's strategy to expand its European presence in the paper and packaging sector, an industry currently undergoing consolidation. To address competition worries raised by the European Commission, the U.S. packaging company will divest five of its plants in Europe, including three in France, one in Portugal, and one in Spain.

The European Commission had earlier expressed concerns that the merger, as initially planned, would have reduced competition in the markets for the manufacture and supply of corrugated sheets in Portugal's North and West, heavy-duty corrugated sheets in North-East Spain, and corrugated cases in North-West France. The Commission also noted that the merger would lead to high combined shares and high concentration levels in several local markets, potentially leading to higher prices for consumers.

DS Smith, a provider of packaging, paper, and recycling services to companies including Amazon (NASDAQ:AMZN ) and Unilever (LON:ULVR ), operates in over 30 countries. The company's acquisition by International Paper was first notified to the Commission on November 25, 2024.

To address the Commission's concerns, International Paper has committed to divesting three plants in Normandy, France, one plant in Ovar, Portugal, and one plant in Bilbao, Spain. These commitments effectively remove the overlaps between the activities of the two companies in the corrugated cases markets in North-West France, as well as the supply of corrugated sheets in the problematic local markets in Portugal and Spain.

The European Commission will approve a suitable buyer for the divested businesses in a separate procedure. International Paper can only proceed with the acquisition of DS Smith following that approval. The Commission concluded that the transaction, as modified by the commitments, would no longer raise competition concerns.

International Paper, headquartered in the U.S., is a provider of renewable fibre-based packaging and pulp products, as well as a recycler of fibre-based waste. It serves customers from manufacturing operations in North America, South America, North Africa, and Europe.

DS Smith, headquartered in the UK, is an international provider of sustainable fibre-based packaging, primarily serving the European and North American markets. It also has recycling and paper-making operations.

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Source: Investing.com