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DS Smith Plans to Acquire Duropack

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DS Smith Plc, U.K., this week announced its proposed acquisition of the Duropack business for approximately EUR 300 million. Duropack, a recycled corrugated board packaging business with market-leading positions across South Eastern Europe, is being acquired from CP Group 2 BV, a One Equity Partners subsidiary.

The acquisition is designed to be highly complementary to DS Smith’s geographic footprint and is intended to transform the group’s position in higher-growth South Eastern European geographies, further strengthening pan-European capabilities to an existing customer base in addition to providing access to new customers.

Duropack has number one or two market positions in many of the geographies in which it operates and, combined with DS Smith’s existing operations in Hungary, Slovakia, and Austria, will have a leading position across South Eastern Europe.

The business is said to be well invested with high quality assets and operates a "short paper, long fiber" model similar to that of DS Smith.

In 2014 the business delivered EBITDA of EUR 41 million and EBIT of EUR 22 million on turnover of EUR 273 million. Cost synergies of EUR 12 million, are expected to be realized within three years of ownership. The additional investment required to integrate the acquisition is around EUR 13 million, incurred over the first two years. This will be funded by cash savings, driven by working capital efficiencies and tight cash management.

The total consideration, including the assumption of debt, is expected to be circa EUR 300 million, subject to customary post-closing adjustments, representing a post synergy multiple of 5.7 times EBITDA.

The acquisition is being financed from existing debt facilities. It will be immediately accretive to earnings per share and generate a return above DS Smith’s cost of capital during the second year of ownership.

The acquisition is subject to competition clearance, which we expect in calendar Q2, with completion shortly thereafter.

"Duropack is an excellent business and a highly complementary fit. It is a further important step in our strategy to leverage our scale and strengthen our geographic footprint. Duropack has high quality assets with market leading positions. We look forward to it contributing to the overall growth of DS Smith in attractive markets where we were previously under-represented," said Miles Roberts, CEO of DS Smith.

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