DS Smith to Purchase SCA for £1.4bn

It has just been announced that DS Smith will be purchasing SCA, in a £1.4bn deal which will make DS Smith Europe’s largest corrugated business. The deal will include all SCA’s packaging operations, apart from two, Swedish Kraft liner mills, and will result in a group with sales of £4bn plus across Europe.

SCA employs approximately 12,000 people and in 2010 it generated sales of £2.3bn, with operating profit of £103m. It produces around 1.8m tonnes of corrugated board and 1.4m tonnes of testliner p.a across Europe, which will be a massive boost to DS Smith’s existing european corrugated operations which has a capacity of 600k tonnes.

This is the latest in a string of deals overseen by DS Smith chief executive Miles Roberts, following the acquisition of the French group Otor and the sale or closure of a number of paper mills as well as the sale of Spicers and is all part of the strategy to make DS Smith a pan-European business focused on recycled corrugated packaging, which was unveiled some time ago.

SCA, who had already sold the majority of  its UK corrugated packaging business some 4 years ago, to SAICA, is now intending to concentrate on its forestry and tissue businesses, and is currently in the process of buying Georgia-Pacific’s European tissue operations for £1.2bn. SCA president and chief executive Jan Johansson stated that “The reason for the divestment is primarily to enable increased growth in the hygiene business. Over the years we have developed our packaging business and we are divesting a competitive operation to an industrial buyer who can continue to develop it.”

In a statement this morning about the acquisition, Roberts said it “builds on DS Smith’s proven strategy and the successful acquisition of Otor” and is an “exceptional opportunity to create value for shareholders”. He commented that DS Smith would become “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”.

Gareth Davis, DS Smith’s chairman, described the deal as a “step change in DS Smith’s capabilities to deliver the recycled packaging service that our customers increasingly want on a pan-European basis”. He also added: “We recognise both the opportunities and challenges that the acquisition will bring and we have planned and invested accordingly.”

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Posted Date: 19th Jan 2012