£1.4bn deal to cash in on Amazon delivery boom

BRITAIN’S biggest cardboardbox maker DS Smith has swooped on Spanish rival Europac.

The packaging business plans to pay £1.4bn for the fast-growing firm in a bid to boost growth in Western Europe, particularly Spain, Portugal and France.

London-based DS Smith produces millions of tons of cardboard and plastic packaging each year, with clients including Next and Amazon.

Its business has boomed with the growth in online shopping, which can require six times more packaging than items delivered to a shop.

DS Smith already employs about 26,000 people in Europe.

It is planning to tap shareholders for £1bn to pay for the deal in a rights issue this month, as well as borrow £648m.

Chief executive Miles Roberts, 53, said he had long admired Europac, adding: ‘This acquisition will help us meet the rising demand for our products.’

Analysts welcomed the deal, with Investec saying it gave DS Smith ‘critical mass’ in a fast-growing region. Europac made sales of £756m last year and profits of £138m.

DS Smith was promoted to the FTSE 100 in December, Its shares have climbed from lows of 47p in 2009 to just under 580p yesterday following a 3pc surge, or 16.8p rise, during the day.

The bid for Europac comes as DS Smith has also recently bought an 80pc stake in the US group Interstate, as well as Romanian firm Ecopack. It is offering ¤16.80 (£14.73) per Europac share, and believes the combined group can save around £44m.

Roberts said there could be savings by reducing the weight of Europac’s cardboard boxes, which are on average 20pc heavier than DS Smith’s product.

The bid has the backing of 59pc of Europac shareholders, including members of the Isidro family which owns 42pc, while the board has deemed it attractive.

It is a busy period in the sector. US packager International Paper wants to buy Europe’s largest box-maker Smurfit Kappa but has so far had its advances rejected by the board as too cheap.

International Paper has until Wednesday to come back with another bid.

If that fails, there is speculation that it might be interested in DS Smith.

Trevor Green, head of equities at UK Aviva, which is a 7pc DS Smith shareholder, said: ‘I see this as an exciting deal by DS Smith in line with their strategy at an opportune time.’