PROPOSED ACQUISITION OF SCA PACKAGING
NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO DO SO.
THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS AND INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY SECURITIES REFERRED TO IN THIS ANNOUNCEMENT EXCEPT ON THE BASIS OF INFORMATION TO BE CONTAINED IN THE PROSPECTUS EXPECTED TO BE PUBLISHED BY THE COMPANY IN CONNECTION WITH THE PROPOSED ACQUISITION AND RIGHTS ISSUE. COPIES OF THE PROSPECTUS WILL BE AVAILABLE FROM THE COMPANY'S REGISTERED OFFICE.
17 January 2012
For immediate release
DS SMITH PLC
PROPOSED ACQUISITION OF SCA PACKAGING AND RIGHTS ISSUE
CREATION OF A LEADING PAN-EUROPEAN RECYCLED PACKAGING BUSINESS
DS Smith Plc ("DS Smith" or "the Company") today announces the proposed acquisition of the packaging division of Svenska Cellulosa Aktiebolaget SCA (publ) excluding the kraftliner assets ("SCA Packaging" or "the SCA Packaging Group") for a net consideration of approximately €1.6 billion (c. £1.3 billion1) ("the Acquisition"). The gross price will be €1.7 billion on a cash, debt and, to the extent legally possible and commercially practicable, pension free basis and approximately €1.6 billion on a net basis after taking into account a pension price adjustment. DS Smith proposes to finance the Acquisition with existing and additional debt and a fully underwritten Rights Issue of 9 New Ordinary Shares for every 8 Existing Ordinary Shares at 95 pence each to raise a total of approximately £466 million.
SCA Packaging is the second largest packaging business in Europe and the Acquisition represents a significant opportunity for DS Smith to achieve its stated strategic aim of becoming the leading supplier of recycled packaging for consumer goods in Europe.
The Board of DS Smith ("the Board") believes that the Acquisition, if completed, will add value for DS Smith Shareholders by:
• providing access to new geographical markets across continental Europe that better matches the location and scale of key pan-European FMCG customers, given the complementary geographic business and customer fit between the two businesses;
• developing broader relationships with existing customers as well as the potential to win new customers through increased ability to supply and innovate new products and improve service levels;
• driving further benefits from the Enlarged Group's operational structure, utilising the strengthened resource in key commercial and operational functions of DS Smith's business;
• delivering estimated annualised pre-tax cost synergies from procurement and operational efficiencies of at least €75 million per annum and cumulative capital expenditure and working capital benefits of at least €40 million by the end of the third full financial year following Completion;
• offering an expected return on capital above DS Smith's weighted average cost of capital for the first full financial year of ownership with further improvement in the second and third full financial years;
• substantially enhancing DS Smith's EPS2; and
1 Based on an exchange rate of €1.00 to £0.8263 on 16 January 2012.
2 This should not be construed as a profit forecast or interpreted to mean that the future earnings per share, profits, margins or cash flows of the DS Smith Group will necessarily be greater than the historic published figures.
• utilising a prudent financial structure for the Acquisition with net debt to EBITDA targeted to be back at 2.0x by the end of the first full financial year following Completion.
The Rights Issue is fully underwritten and will raise approximately £466 million (gross). Shareholders have already committed to sub-underwrite more than 50.0% of the Rights Issue. Shareholders have shown DS Smith their support for the Acquisition and Standard Life Investments Ltd, the Company's largest shareholder, has confirmed that it is fully supportive of the Acquisition and the accompanying Rights Issue. Standard Life Investments Ltd currently holds 63,796,896 shares in the Company representing 14.6% of the issued share capital.
Owing to its size, the Acquisition constitutes a reverse takeover under the Listing Rules and upon Completion the listing of the Ordinary Shares will be cancelled pursuant to the Listing Rules. Application will be made to the UKLA and the London Stock Exchange for the Ordinary Shares in the Enlarged Group to be re-admitted to listing on the premium segment of the Official List and to trading on the main market of the London Stock Exchange, respectively. The Acquisition requires approval from Shareholders, and accordingly a General Meeting will be convened for 3 February 2012. The Acquisition will also require, amongst other matters, certain regulatory clearances. It is currently expected that the Acquisition will complete during the second quarter of calendar 2012.
The Acquisition includes a formal offer to acquire the French Business which may be accepted following Works Council consultation.
Commenting on the Acquisition, DS Smith's Group Chief Executive, Miles Roberts said:
"This Acquisition builds on DS Smith's proven strategy and the successful acquisition of Otor. This is an exceptional opportunity to create value for shareholders by becoming the leading recycled packaging company across Europe - a company that will be better positioned to deliver even better service and innovation to our strong and growing FMCG customer base. SCA Packaging is a well invested business with long positions in recycling and packaging and short paper capacity that is very complementary to our strengths. It is a great step in DS Smith's development and I look forward to working together with the team at SCA Packaging to create an outstanding supplier for our customers and making it a fulfilling place for our staff to work to deliver substantial value for our customers and Shareholders."
DS Smith's Chairman, Gareth Davis said:
"This Acquisition is a unique opportunity, offering the combination of a clear strategic rationale, potentially excellent financial returns and a step change in DS Smith's capabilities to deliver the recycled packaging service that our customers increasingly want on a pan-European basis. We recognise both the opportunities and the challenges that the Acquisition will bring and we have planned and invested accordingly. We are focussed and determined to integrate, develop and grow these two excellent businesses as the platform for delivering superior returns for our investors over the years to come. "
This preceding summary should be read in conjunction with the full text of the following announcement and its appendices, including the announcement published by DS Smith simultaneously with this announcement which includes, amongst other matters, financial information on SCA Packaging.
A meeting for analysts and institutional investors will be held today at J.P. Morgan Cazenove, 20 Moorgate, London at 9.15 a.m., accessible at +44 207 162 0125 and the conference id 910304.
A recorded interview with Miles Roberts, Group Chief Executive and Steve Dryden, Group Finance Director, regarding the transaction is available on the Company's website www.dssmith.uk.com
Indicative timetable
Publication and posting of the Prospectus, the Notice of General 17 January 2012
Meeting and Form of Proxy
Rights Issue Record Date close of business on 1 February 2012
General Meeting 9.30 a.m. on 3 February 2012
Existing Ordinary Shares marked "ex" by the London Stock Exchange 8.00 a.m. on 6 February 2012
Latest time and date for acceptance, payment in full and registration 11.00 a.m. on 21 February 2012
of renunciation of Provisional Allotment Letters
Dealings in New Ordinary Shares, fully paid, commence on the by 8.00 a.m. on 22 February 2012
London Stock Exchange
The Company expects to publish a supplementary prospectus prior to the General Meeting to reflect certain unaudited combined financial information for SCA Packaging for the year ended 31 December 2011.
Enquiries:
DS Smith Plc +44 (0) 1628 583 400
Miles Roberts, Group Chief Executive
Steve Dryden, Group Finance Director
Rachel Stevens, Head of Investor Relations
J.P. Morgan Cazenove (Financial Adviser, Corporate Broker, Sponsor +44 (0) 20 7588 2828
and Sole Bookrunner)
Jonathan Wilcox (Equity Capital Markets)
Mark Breuer
Malcolm Moir
Luke Bordewich
Julia Thomas
HSBC (Co-Bookrunner) +44 (0) 20 7991 8888
Stuart Dickson
Nick Donald
RBS Hoare Govett (Co-Lead Manager) +44 (0)20 7678 8000
Nick Adams
Lee Morton
Tulchan +44 (0) 20 7353 4200
John Sunnucks
David Allchurch
James Macey White
This announcement is not for release, publication or distribution, in whole or in part, directly or indirectly, in or into the United States, Australia, Canada, Japan or South Africa or any other jurisdiction into which the publication or distribution would be unlawful. These materials do not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire securities in the United States, Australia, Canada, Japan or South Africa or any other jurisdiction in which such offer or solicitation would be unlawful.
This announcement has been issued by, and is the sole responsibility of, DS Smith Plc. No representation or warranty express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by J.P. Morgan Securities Ltd, J.P. Morgan Limited, HSBC Bank plc or The Royal Bank of Scotland plc (trading as RBS Hoare Govett) (the "Banks") or by any of their affiliates or agents as to or in relation to, the accuracy or completeness of this announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any responsibility or liability therefore is expressly disclaimed.
The Banks, each of which is authorised and regulated in the United Kingdom by the Financial Services Authority, are acting exclusively for DS Smith Plc in connection with the matters set out in this announcement and the proposed Acquisition and Rights Issue. The Banks are not, and will not be, responsible to anyone other than DS Smith Plc for providing the protections afforded to their respective clients or for providing advice in relation to the proposed Acquisition and Rights Issue or any other matters referred to in this announcement. Apart from the responsibilities and liabilities, if any, which may be imposed on it by the Financial Services and Markets Act 2000, each of the Banks accepts no responsibility whatsoever and makes no representation or warranty, express or implied, for the contents of this announcement, or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the proposed Acquisition or the Rights Issue, and nothing in this announcement is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or the future. Each of the Banks accordingly disclaims to the fullest extent permitted by law all and any responsibility and liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this announcement or any such statement.
This announcement has been prepared in accordance with English law, the Listing Rules and the Disclosure Rules and Transparency Rules and information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England.
The distribution of this announcement in jurisdictions other than the United Kingdom may be affected by the laws of relevant jurisdictions. Therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom will need to inform themselves about, and observe any applicable requirements.
This announcement is for information purposes only and shall not constitute an offer to buy, sell, issue or subscribe for, or the solicitation of an offer to buy, sell, issue, or subscribe for, any securities in DS Smith Plc or any other entity. Any such offer will be made solely by means of a prospectus to be published in due course and any supplement or amendment thereto and any acquisition of securities in DS Smith Plc should be made solely on the basis of the information contained in such prospectus.
Neither the content of the Company's website (or any other website) nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.
This announcement contains (or may contain) certain forward-looking statements with respect to certain of DS Smith's current expectations and projections about future events. These statements, which sometimes use words such as "anticipate", "believe", "intend", "estimate", "expect", "will", "shall", "may", "aim", "predict", "should", "continue" and words of similar meaning and/or other similar expressions that are predictions of or indicate future events and/or future trends, reflect the directors' beliefs and expectations at the date of this announcement and involve a number of risks, uncertainties and assumptions that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement.
Statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The information contained in this announcement is subject to change without notice and, except as required by applicable law, neither DS Smith nor either of the Banks assumes any responsibility or obligation to update publicly or review any of the forward-looking statements contained herein. You should not place undue reliance on forward-looking statements, which speak only as of the date of this announcement.
No statement in this announcement is or is intended to be a profit forecast or to imply that the earnings of DS Smith for the current or future financial years will necessarily match or exceed the historical or published earnings of DS Smith. The Nil Paid Rights, the Fully Paid Rights, the New Ordinary Shares, the Provisional Allotment Letters and the Shares have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended and may not be offered, sold or transferred, directly or indirectly, within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and the securities laws of any state or other jurisdiction of the United States. This announcement does not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire, nor shall there be any sale of, the Nil Paid Rights, the Fully Paid Rights, the New Ordinary Shares, the Provisional Allotment Letters and the Shares in any jurisdiction in which such offer, solicitation or sale would be unlawful. The Nil Paid Rights, the Fully Paid Rights, the New Ordinary Shares, the Provisional Allotment Letters and the Shares have not been, and will not be, registered with any regulatory authority of any state within the United States. No money, securities or other consideration is being solicited and, if sent in response to the information herein, will not be accepted.There will be no public offer of any securities of the Company in the United States.