Proposed acquisition of Duropack
DS Smith Plc (“DS Smith”), the leading provider of recycled corrugated packaging in Europe, is pleased to announce the proposed acquisition of the Duropack business (“the acquisition”) for approximately €300m (c.£220m). Duropack, a recycled corrugated board packaging business with market-leading positions across South Eastern Europe, is being acquired from CP Group 2 BV, a One Equity Partners subsidiary.
The acquisition is highly complementary to DS Smith’s geographic footprint and transforms our position in higher-growth South Eastern European geographies, further strengthening our pan-European capabilities to our existing customer base in addition to providing access to new customers.
Duropack has number one or two market positions in many of the geographies in which it operates and, combined with DS Smith’s existing operations in Hungary, Slovakia and Austria, will have a leading position across South Eastern Europe.
The business is well invested with high quality assets and operates a “short paper, long fibre” model similar to that of DS Smith.
In 2014 the business delivered EBITDA of €41 million and EBIT of €22 million on turnover of €273 million. Cost synergies of €12 million, are expected to be realised within three years of ownership. The additional investment required to integrate the acquisition is c.€13 million, incurred over the first two years. This will be funded by cash savings, driven by working capital efficiencies and tight cash management.
The total consideration, including the assumption of debt, is expected to be circa €300 million, subject to customary post-closing adjustments, representing a post synergy multiple of 5.7 times EBITDA.
The acquisition is being financed from existing debt facilities. It will be immediately accretive to earnings per share and generate a return above our cost of capital during the second year of ownership.
The acquisition is subject to competition clearance, which we expect in calendar Q2, with completion shortly thereafter.
Miles Roberts, Chief Executive of DS Smith said:
“Duropack is an excellent business and a highly complementary fit. It is a further important step in our strategy to leverage our scale and strengthen our geographic footprint. Duropack has high quality assets with market leading positions. We look forward to it contributing to the overall growth of DS Smith in attractive markets where we were previously under-represented.”
Further details on Duropack
Geographic presence: 14 corrugated packaging sites, 2 paper mills and 18 recycling sites across 9 countries comprising Austria, Hungary, Bosnia, Bulgaria, Macedonia, Serbia, Slovakia, Croatia and Slovenia.
Volumes: c.565msm corrugated packaging, c. 208kt testliner production and c. 160kt recycled paper collection.
Financial details: Gross assets of €281 million as at 31 December 2014; 2014 profit before tax of €15 million.