LONDON (dpa-AFX) - DS Smith Plc (SMDS.L), a supplier of recycled packaging for consumer goods and office products, Tuesday said it has proposed to acquire the packaging division of Sweden's Svenska Cellulosa Aktiebolaget SCA (SVCBY.PK) for a net consideration of about 1.6 billion euros, or about $2 billion. The company plans to finance the acquisition with existing and additional debt and also by way of a 9 for 8 Rights Issue. Shares of DS Smith rose more than 5 percent in the morning trade on the London Stock Exchange. DS Smith said the acquisition excludes kraftliner assets of SCA Packaging. The gross price for the deal will be 1.7 billion euros on a cash, debt and, to an extent, pension-free basis. After pension price adjustment, net consideration will be nearly 1.6 billion euros. DS Smith stated that the acquisition represents a significant opportunity to achieve its strategic aim of becoming a leading supplier of recycled packaging for consumer goods in Europe. Completion is expected during the second quarter of calendar 2012 and the acquisition is expected to help substantially enhance DS Smith's earnings per share. The deal is also expected to offer 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.
DS Smith plans 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 and raise 466 million pounds by way of a fully underwritten Rights Issue. Shareholders, including Standard Life Investments Ltd, the company's largest shareholder holding 14.6 percent of its issued share capital, have confirmed their full support for the acquisition and the accompanying Rights Issue, DS Smith added. Miles Roberts, DS Smith's Chief Executive 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.' For the full year ended December 31, 2010, SCA Packaging reported revenues of 2.54 billion euros. SMDS.L is currently trading at 215 pence, up 11.4 pence or 5.6 percent, on a volume of 1.13 million shares, against a three-month average volume of 827 thousand shares on the LSE.
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