International Paper Plans Spin Off DS Smith Amid Market Challenges

The American packaging group International Paper, which acquired London-listed DS Smith in a significant $7.2 billion deal, is now contemplating a spin-off of its European, Middle East, and Africa division. This division largely comprises the DS Smith business and is set to be listed on both the London and New York stock exchanges.

International Paper’s decision follows a tumultuous year that saw the company outperform its competitor Mondi in an intense acquisition process. The proposed demerger is expected to take place within a 12 to 15-month timeframe, contingent on shareholder approval. This strategic move aims to create two independent companies that can focus on distinct market environments, thereby unlocking potential value.

With annual sales projected at $8.5 billion and underlying profits anticipated to exceed $1 billion, the newly branded DS Smith is poised to reclaim its status in the FTSE 100. Andy Silvernail, chairman and chief executive of International Paper, stated that the organisational reshuffle is intended to enhance performance and maximise value in both regional operations.

In light of increasing environmental regulations and a decline in consumer spending post-pandemic, both International Paper and Mondi have faced significant stock market challenges. Shares in International Paper have plummeted by a third, while Mondi has experienced similar declines.

As DS Smith prepares for this transition, it continues to streamline operations across its EMEA division, having already closed five sites in the UK and putting approximately 300 jobs at risk. Tim Nicholls, executive vice-president of DS Smith, highlighted the need for agility in adapting to market changes to better serve customer needs.

The upcoming year will be crucial for both International Paper and DS Smith as they navigate these challenging circumstances and strive to carve out successful, independent futures.