LINPAC Containers is the leading UK independent manufacturer of corrugated packaging and has an estimated market share of approximately 11%. It has no paper manufacturing capacity.
Following the acquisition DS Smith will be the UK leader in corrugated packaging, in addition to its existing leading UK positions in corrugated case material paper and the collection of recovered paper.
Recovered
Severnside supplies just over one million tonnes of recovered paper – mostly in the form of old-KLS (used cardboard)- to the St Regis mills which are owned by DS Smith.
The proposed acquisition of LINPAC will strengthen all sides of the business and DS Smith higlighted the effect if will have on its recovered paper side. Tony Thorne, group chief executive of DS Smith, said: “We are delighted to be acquiring LINPAC Containers, a high quality business with good market positions and an experienced management team.
“On completion, DS Smith will become the largest producer of corrugated packaging in the UK, complementing existing leadership positions in CCM manufacture and the collection of recovered paper. We believe that by combining LINPAC Containers with our existing business we will be able to generate substantial synergies.
He added: “This move is in line with our strategy to develop our strong European regional positions in paper and corrugated packaging and is an excellent opportunity to enhance the group’s earnings and increase shareholder value.”
Approval
A fully underwitten rights issue will raise 71 million towards the purchase. In view of its size, the acquisition requires the approval of DS Smith Shareholders at an extraordinary general meeting to be held on 22 March 2004 but is not conditional on the rights issue.
Overall the DS Smith Group produces 1.1 billion square metres per annum of corrugated packaging at 25 factories in the UK and 12 factories in continental Europe. It manufactures 1.2 million tonnes of paper per annum at six mills in the UK and three mills in continental Europe. Approximately 0.9 million tonnes of the paper produced is CCM which is used for manufacturing corrugated board and is sold both to DS Smith’s corrugated packaging manufacturing operations and to third parties on the open market.
New mill
The acquisition could strengthen speculation that St Regis will again look at building a new paper mill, possibly in the North East of England. Some of its mills are seen as needing updating and the option of a new mill has been discussed within the company in the past few year. Such a project could also attract interest from the Waste and Resources Action Programme which is keen to see more domestic waste paper used within UK mills.
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