International Paper rises on report of private equity interest in European arm

Investing.com -- International Paper (NYSE: IP) shares rallied 5.5% Thursday following reports that private equity firms Lone Star and Atlas Holdings are weighing buyout offers for the group’s European packaging arm. According to reporting from the Financial Times, the buyout interest could prompt the Memphis-based paper giant to abandon its previously announced plan to spin off and float the London-listed division on public markets.

The two buyout shops represent the final remaining suitors in talks after other private equity firms withdrew from the process. Sources familiar with the matter indicated that prospective bids may value the business, formerly known as DS Smith, at under $6 billion (£4.5 billion).

A deal at that valuation would represent a significant contraction from 2024, when International Paper acquired the FTSE 100 packaging group for £5.8 billion, or £7.8 billion including debt. The sharp decline underscores broader sector headwinds, as packaging demand and pricing have softened since peaking during the pandemic-era boom in e-commerce deliveries.

International Paper previously announced plans in January to divide into two standalone public entities, effectively unwinding the DS Smith transaction just a year after its completion. The unwinding follows a nearly $2.5 billion goodwill impairment charge that the company recorded on its EMEA operations in its latest annual results.

Under the initial framework, International Paper intended to retain its core North American operations while listing the combined European assets in London and New York by early 2027. The group noted this week that preparations for the spin-off remained on track, with a capital markets day scheduled for November to outline the strategic roadmap for the re-established DS Smith unit.

However, no final transaction decisions have been made, and International Paper maintains the option to proceed with the planned stock market listing. Should a private sale materialize instead of a flotation, it would deal another setback to the London Stock Exchange, which continues to face a dearth of new listings amid an ongoing wave of take-private transactions.

Original Article

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