DS Smith sells plastics division for nearly £450m

By Richard Stuart-Turner, Wednesday 06 March 2019

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DS Smith has sold its plastics division to US private equity firm Olympus Partners in a deal worth nearly £450m.

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Roberts: "This is a financially and strategically attractive deal"

The transaction, which has an enterprise value of $585m (£445m), is expected to complete in the second half of this calendar year, subject to customary closing conditions including regulatory approvals.

The London-headquartered packaging giant first revealed its intentions to sell the plastics division in December, following an initial review of its plastics business initiated earlier in 2018.

The division comprises the plastics operations of DS Smith, including flexible plastics, rigid plastics and foam products. It has 26 sites across 12 countries, employing around 2,000 staff. Its UK operation includes Foam Products sites in Livingstone, Spennymoor, Northampton and Torpoint and a Rigid Packaging facility in Gloucester.

The division’s gross assets as at 31 October 2018 were £223m and its pre-tax profit for the 12-month period to 31 October 2018 was £28m.

The value of the deal represents a multiple of 9.9x EBITDA based on the 12-month period to 31 October 2018.

Stamford, Connecticut-based Olympus Partners also owns flexible packaging specialist Liqui-Box.

In a call to investors this morning (6 March), DS Smith chief executive Miles Roberts said: “This sale is another step in our strategy to focus on sustainable packaging and at the same time it accelerates our financial deleveraging in line with our medium-term targets. I’m delighted to have agreed this financially and strategically attractive deal.”

DS Smith expects net cash proceeds after taxation, transaction adjustments and expenses of approximately £400m.

The group has also provided an update on its trading for the period since 1 November 2018.

“Trading has continued to be strong, in line with our expectations. We have continued to see good corrugated box volume growth with continued market share gains driven by the quality of our offering for large and e-commerce customers and our FMCG-weighted customer base,” said Roberts.

“The Christmas period has been especially busy for our e-commerce focused customers with our sector leading offering supporting our customers over this critical period.”

He added: “Our US business, which we acquired in 2017, continues to perform well with strong margins and returns well ahead of our acquisition case. Group margins are expected to progress further in the second half of our financial year and operating cashflow generation is stronger than in the comparable period last year.”

Roberts also highlighted DS Smith’s acquisition of Europac, which was completed in January.

“It’s great to get started on the integration and I’m very pleased how this has been going. The customer and our new colleague reaction has been everything that we hoped it would be,” he said.

Concluding, Roberts said the business is pleased with its performance in the second half of the year to date.

“While macroeconomic conditions remain uncertain, we are confident of continued strong demand for our innovative and high-quality sustainable packaging and the resilience of our FMCG-focused customer base.

“At the same time, the sale announced today will further strengthen our robust balance sheet and the board continues to view the prospects for the business with confidence.”

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