Smith (Ds) Plc Acquisition

7th Jul 2010 07:00

TIDMSMDS RNS Number : 9422O Smith (DS) PLC 07 July 2010 ? DS Smith Plc ("DS Smith" or the "Company") Proposed Acquisition of the Otor Group ("Otor") for EUR247 million The Board of DS Smith announces today that it has submitted a binding offer for the proposed acquisition of Otor, a leading corrugated packaging company in France (the "Proposed Acquisition"). The Otor Group consists of Otor S.A., the shares of which are listed on NYSE Alternext Paris, and Otor Finance, a holding company for The Carlyle Group ("Carlyle") which owns and controls 94.75 per cent. of Otor S.A. The remaining 5.25 per cent. of the shares of Otor S.A. are in free float on NYSE Alternext Paris. Under the terms of the binding offer, DS Smith intends to acquire control of more than 95 per cent. of the share capital of Otor from entities controlled by Carlyle, from Credit Lyonnais ("LCL") and from the chairman of Otor S.A. before making a mandatory offer for the remaining shares of Otor S.A. (the "Minority Offer") in accordance with French stock exchange regulations. The total consideration for the Proposed Acquisition, including the Minority Offer, of EUR247 million (approximately GBP206 million), will be in cash and the assumption of existing debt, equivalent to an all cash offer of EUR8.97 per Otor S.A. share. Under French regulations a minority squeeze out can be achieved with a shareholding representing 95 per cent. of the shares and voting rights. More details on the proposed acquisition structure can be found later in this announcement. The parties' intention is to inform Otor's group works council and to execute the relevant documentation as soon as possible. The Board believes that the combination of DS Smith and Otor satisfies a number of key strategic objectives, in particular the development of a strong continental European corrugated packaging business focused on the fast moving consumer goods sector ("FMCG"), and strengthening significantly DS Smith's French presence. The Board also believes that the DS Smith Group, as enlarged by the Proposed Acquisition (the "Enlarged Group"), will have enhanced long-term growth potential through its strong business across the UK and continental Europe and from increased spending on the more resilient FMCG markets. Combining Otor's successful and well-established corrugated packaging business with DS Smith's existing French operations will create a platform with significantly enhanced capabilities to address the needs of key corrugated packaging customers both in France and more broadly in continental Europe. Following the Proposed Acquisition, DS Smith will re-enforce its position as a leading European supplier of recycled corrugated packaging, complementing its existing strong business in UK corrugated packaging and recycling. Key benefits from the Proposed Acquisition include: · a broader customer base and greater exposure to the large, and more resilient, FMCGsegment of the corrugated packaging market in France; · the strengthening of DS Smith's position as a major European corrugated packaging company with a better product and market mix, and a reduction in the effect of the paper cycle on the DS Smith Group; · estimated total cost synergies of around EUR9.3million (approximately GBP7.7 million at the prevailing exchange rate) in the second full financial year of ownership; and · margin and earnings enhancement for the DS Smith Group and a return on the investment in Otor above DS Smith's weighted average cost of capital, in the first full financial year of ownership. The total consideration for the Proposed Acquisition, including the Minority Offer, of EUR247 million (approximately GBP206 million), will be in cash and the assumption of existing debt, equivalent to an all cash offer of EUR8.97 per Otor S.A. share. The cash element will be funded through a combination of existing and new committed bank facilities and the proceeds from a placing of up to 9.99 per cent. of new ordinary shares to raise up to approximately GBP47 million (announced separately today) (the "Placing"). The Placing is not conditional on the Proposed Acquisition completing. The Proposed Acquisition will be subject to, inter alia, regulatory clearances and the approval of DS Smith's shareholders at a General Meeting to be held as soon as practicable. Miles Roberts, Group Chief Executive of DS Smith stated: "The acquisition of Otor realises a number of key strategic objectives for DS Smith. It makes us one of the leading players in corrugated packaging in France with 80 per cent. of Otor's sales derived from cyclically less sensitive FMCG customers. Extensive due diligence gives us confidence that Otor is a high quality business with structural growth opportunities, notably in shelf-ready packaging where penetration is markedly lower than in the UK. Otor also offers an excellent platform for DS Smith to increase its European sales penetration. The acquisition realises several of our financial objectives for DS Smith. Otor is a high margin business that should be accretive to both earnings and returns for the enlarged group in the first full year of ownership." An analyst meeting to discuss the Proposed Acquisition will be held today at 9:30 am BST at the offices of J.P. Morgan Cazenove, 20 Moorgate, London, EC2R 6DA. Enquiries +------------------------------+------------------------------+ | DS Smith Plc | +44 (0)1628 583 400 | | Miles Roberts, Group Chief | | | Executive | | | Steve Dryden, Group Finance | | | Director | | | Liz Christie, Head of | | | Investor Relations | | | | | +------------------------------+------------------------------+ | J.P. Morgan Cazenove | +44 (0)20 7742 4000 | | Malcolm Moir | | | Mark Breuer | | | Niklas Kloepfer | | | | | +------------------------------+------------------------------+ | Tulchan | +44 (0)20 7353 4200 | | John Sunnucks | | | David Allchurch | | | | | +------------------------------+------------------------------+ The analyst briefing may be heard live by dialling in on +44 (0)20 7806 1951. The presentation will be webcast. Please use the link to http://www.dssmith.uk.com/pages/Investors.asp to access the webcast. The slides used at this briefing will be posted in the Investors/Presentations section of the Group's website (www.dssmith.uk.com) from 9:25 am BST. A replay of the briefing will be available by telephone for ten days, from 2 hours after the meeting has ended, on +44 (0)20 7111 1244 (PIN: 5915243#). This announcement has been issued by, and is the sole responsibility of, DS Smith. No representation or warranty express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by J.P. Morgan plc or by any of its affiliates or agents as to or in relation to, the accuracy or completeness of this announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed. J.P. Morgan plc, which conducts its UK investment banking business as J.P. Morgan Cazenove and is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting for DS Smith and for no one else in connection with the matters set out in this announcement and the Proposal and will not be responsible to anyone other than DS Smith for providing the protections afforded to clients of J.P. Morgan plc nor for providing advice in relation to the Proposed Acquisition or any matters set out in this announcement. This announcement contains (or may contain) certain forward-looking statements with respect to certain of DS Smith's current expectations and projections about future events. These statements, which sometimes use words such as "anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning, reflect the directors' beliefs and expectations and involve a number of risks, uncertainties and assumptions that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement. Statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The information contained in this announcement is subject to change without notice and, except as required by applicable law, neither DS Smith nor J.P. Morgan Cazenove assumes any responsibility or obligation to update publicly or review any of the forward-looking statements contained herein. You should not place undue reliance on forward-looking statements, which speak only as of the date of this announcement. No statement in this announcement is or is intended to be a profit forecast or to imply that the earnings of DS Smith for the current or future financial years (MORE TO FOLLOW) Dow Jones Newswires July 07, 2010 02:00 ET (06:00 GMT)