Focus Label Machinery Ltd


DS Smith Plc Proposed Acquisition of Interstate Resources

Friday, Jun 30, 2017

DS Smith Plc announces that it, along with its wholly-owned U.S. subsidiary, DS Smith Holdings, Inc. (together with the Company, the Buyer), has entered into a conditional agreement to acquire 80 per cent. of the total issued share capital of Indevco Management Resources, Inc. (IMRI), the holding company for the Interstate Resources, Inc. group (IMRI and its subsidiaries together, the IRI Group), from Merpas Co. S.à r.l. (Merpas) for consideration of US$920 million (approximately £722 million) (the Initial Acquisition). The Buyer will also assume or procure repayment of 100 per cent. of the IRI Group's financial indebtedness at Completion, expected to be approximately US$226 million (approximately £177 million). The consideration for the Initial Acquisition will be subject to customary post-Completion net debt and working capital adjustments.

The Buyer intends to satisfy the consideration through: (i) a payment of US$846 million (approximately £664 million) in cash, to be satisfied out of the proceeds of a £280 million cash placing (net of commissions and expenses) (the Placing), utilisation of up to £400 million from a new bridge facility (the New Debt Facilities) and the rest from existing cash resources; and (ii) the issue of consideration shares with a value of US$300 million (approximately £235 million) to Merpas (the Consideration Shares).

The Buyer and Merpas UKCo (an entity within the Merpas group that will hold the shares in IMRI) have also agreed that, on fixed dates over the next four years, Merpas UKCo can require the Buyer to acquire some or all of the remaining shares in IMRI on agreed terms and, on the fifth anniversary of Completion, the Buyer shall (unless the Buyer and Merpas UKCo agree otherwise) acquire any shares in IMRI that it does not already own, on agreed terms (any such further acquisition of shares in IMRI being a Further Acquisition and, together with the Initial Acquisition, the Acquisition).

The IRI Group is a family-owned integrated packaging and paper producer concentrated on the East Coast of the United States, operating from 19 production sites and having approximately 1,500 employees. For the year ended 31 December 2016, the IRI Group had revenues of $618 million.

The IRI Group operates across the entire packaging chain including wood procurement, paper manufacturing, design, packaging manufacturing and customer logistics. Customers in the United States accounted for 94 per cent. of turnover in the year ended 31 December 2016, with the majority of the IRI Group's customer base for its packaging products being FMCG and food customers.

The Acquisition aligns with the global convergence of DS Smith's customers' requirements and is expected to create a higher quality, higher margin group with more growth potential.



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