2nd UPDATE: DS Smith To Acquire France's Otor In Europe Push

7th Jul 2010 11:26

(Adds bookbuild result.) By Jason Douglas Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Packaging company DS Smith PLC (SMDS.LN) said Wednesday it has put in an offer to acquire a French peer from Carlyle Group LP for EUR247 million, in a deal that would bolster its share of the European market for "shelf-ready" packaging for fast-moving consumer goods like soft drinks, yoghurts and toiletries. The purchase of Otor (ALOTO.FR), a recycled corrugated packaging manufacturer, would boost DS Smith's earnings in the first full year of ownership and would significantly improve its margins, DS Smith Group Chief Executive Miles Roberts told Dow Jones Newswires. Otor reported 2009 revenue of EUR315.1 million and operating income of EUR28.7 million, excluding impairment charges. Its customers include French food group Danone SA (BN.FR). Roberts said the margin on Otor's earnings before interest and tax is about 8.6% due to the high prices it commands for complex shelf-ready packaging, which protect goods in transit and can be converted into displays once in the supermarket. DS Smith's margin is about 4.7%, he said. The deal would also bring cost savings for the combined company of about EUR9.3 million by the second year of ownership, DS Smith said. Roberts said these would be achieved primarily by trimming head office costs at Otor and ending its listing on the French bourse. Evolution Securities analyst Harry Philips said the proposed acquisition is a "punchy strategic move" by Berkshire, England-based DS Smith that will give it a 20% share in the market for corrugated packaging in France. At 1012 GMT, shares in the company were up 1 pence, or 0.9%, at 127.1 pence, outperforming a 0.7% lower FTSE 250 index. DS Smith said it submitted an offer to buy Otor for EUR247 million in cash, making it the largest single deal in the company's history. It proposes to acquire the 95% of the company owned by Carlyle Group, Credit Lyonnais SA and Otor's chairman before making a mandatory offer for the remaining shares. To help fund the acquisition, DS Smith Wednesday said it raised GBP47.2 million in a share sale. It sold roughly 39.3 million shares at 120 pence a share, a 4.8% discount to Tuesday's close. JP Morgan Cazenove handled the share sale. Roberts said DS Smith intends to fund about a quarter of the acquisition with cash and the remainder will be funded by new borrowing facilities agreed with its banks. The deal requires the approval of shareholders. Roberts added DS Smith is keen to grow and acquisitions will remain "a part of its thinking" in future. -By Jason Douglas, Dow Jones Newswires; 44-20-7842-9272; [email protected] (END) Dow Jones Newswires July 07, 2010 06:26 ET (10:26 GMT)