DS Smith PLC (LON:SMDS) said it has agreed to purchase European counterpart Papeles y Cartones de Europa, also known as Europac, for €1.67bn (£1.4bn).
The FTSE 100-packaging manufacturer said its offer consisted of €16.8 per Europac share, valuing the business at €1.9bn on an enterprise value basis.
READ: DS Smith raises expectations for synergies of Interstate Resources acquisition
DS Smith added that the deal would be partly funded by a new debt facility of around €740mln, along with a £1bn rights issue.
The group said the acquisition was an “exceptional scale opportunity” to enhance its customer offer in a key packaging growth region, as well as strengthening its global supply chain.
The company added that annual run-rate pre-tax cost synergies of €50mln had been identified, with the acquisition accretive to earnings per share and return on invested capital (pre-tax) to exceed the weighted average cost of capital in the first full financial year of ownership.
Europac's board confirmed that the acquisition was friendly and attractive, subject to fiduciary duties and to further assessment of relevant documentation.
DS Smith said it was expecting to publish a prospectus and launch the rights issue when it announces its full year results in June.
Acquisition to enhance customer offer in Western Europe
Miles Roberts, group chief executive of DS Smith, said: "The acquisition of Europac is a very exciting development for DS Smith, strengthening our position as a leading global supplier of sustainable packaging solutions. We have a long-standing relationship with Europac, which is a company we have long admired, given the quality of their assets, employees and customers.
He added: “This acquisition will enhance our customer offer in Western Europe, a key packaging growth region, and help us meet the rising demand for our high-quality packaging and sustainable products. It will also strengthen our global supply chain and means we can serve our, and Europac's, customers better.”
José Miguel Isidro Rincón, executive chairman of Europac, also commented: “In my capacity as shareholder, I believe that the offer submitted by DS Smith, which upon implementation would result in a combination with Europac, would deliver important operating and commercial synergies for both companies."
The announcement follows acquisition news in early May when DS Smith said it expected a further US$5mln in annualised merger synergies from the integration of US-based Interstate Resources in which it acquired an 80% stake last year in its first step into US markets.