International Paper (IP), the prominent producer of renewable fiber-based packaging, has officially completed its acquisition of DS Smith plc, marking a significant milestone for the company. The acquisition was finalized on January 31, 2025, through International Paper's indirect wholly owned subsidiary, International Paper UK Holdings Limited. This strategic maneuver is expected to bolster International Paper’s status in the marketplace and extend its reach within the European market.
Under the terms of the acquisition, DS Smith shareholders will receive 0.1285 of a new share of International Paper's common stock for each ordinary share held. This transaction will lead to the issuance of approximately 179,847,780 new shares of International Paper's stock. Following this major acquisition, DS Smith shares will be delisted from the London Stock Exchange on February 4, 2025, transitioning to new share trading on the New York Stock Exchange under the symbol "IP" and also on the London Stock Exchange under the new symbol "IPC." The management at International Paper expressed optimism about the acquisition, emphasizing the potential for synergies and growth opportunities in the packaging sector.
Concurrent with the acquisition announcement, International Paper reported its fourth-quarter 2024 earnings, which showcased mixed performance. The company generated revenue of $4.58 billion, falling short of the anticipated $4.73 billion. Despite this revenue miss, the company recorded earnings per share (EPS) of negative $0.02, which surpassed expectations of negative $0.07. Stock reaction to the earnings report reflected the mixed sentiments, resulting in a premarket decline of 1.84%, trading at $56.
CEO Andy Silvernet discussed the company's commitment to fostering a performance-driven, customer-centric culture, noting, "We are building a performance-driven customer-centric culture." He recognized the accomplishments and challenges the company faces, stating, "Doing hard things is what we have to do." This calls for decisive changes and adaptability as International Paper navigates future growth prospects.
The Q4 earnings report highlighted several operational challenges impacting performance, including higher costs attributed to volume declines and reliability issues. Silvernet mentioned, "We have been living in a world of lax capacity for too long," signifying the need for increased operational efficiency as the company restructures its production processes.
Looking forward, International Paper has ambitious plans for the new corrugated box facility slated to be built in Waterloo, Iowa. This facility aims to deliver lower costs by approximately 20% and is positioned strategically to support key customer segments. These enhancements are part of International Paper's broader $1.2 billion cost reduction initiative, aiming to eliminate $1.6 billion from its costs over time, including specific divestitures such as five box plants and the closure of its Georgetown mill. The resource optimization across its operations under the 80/20 lighthouse strategy is expected to improve productivity across additional plants, with projected gains exceeding 20%.
Despite the positives, the company cautions about risks stemming from supply chain disruptions, market volatility, and the requirement for successful implementation of its cost-reduction strategies. Analysts engaged during the earnings call remarked on the impacts of contract restructuring, which played a significant role in the company’s year-over-year volume declines. Senior leadership, including Silvernet, reassured stakeholders about efforts to stabilize earnings, with hopes of registering improved performance as the fiscal year progresses.
Concluding the earnings call, Silvernet stated, "We are optimistic about the path forward, especially with the acquisition of DS Smith enabling us to create the global leader in sustainable packaging solutions." The comprehensive strategy adopted by International Paper, coupled with the strategic acquisition and expansion initiatives, positions the company favorably for growth and innovation within the industry. Stakeholders are encouraged to remain informed through the company's forthcoming Investor Day on March 25, which will provide additional insights on the future roadmap.