International Paper, the US paper and packaging giant, has laid out its roadmap for turning DS Smith into a standalone company, even as it keeps the door open to selling the business outright. The plan, unveiled this week, sketches out a leaner, more focused pan-European packaging player with ambitious cost-cutting targets.
What is the 'new DS Smith'?
The proposed standalone DS Smith would combine DS Smith's existing operations in Europe, the Middle East, and Africa with International Paper's own packaging assets in those regions. The result would be a pan-European corrugated-packaging company—essentially a business that makes the cardboard boxes and packaging materials that ship goods across the continent.
International Paper said the separation remains on track, or even ahead of schedule, relative to its original 12-to-15-month timeline. The company plans a primary listing on the London Stock Exchange and a secondary listing in New York, giving investors on both sides of the Atlantic a chance to own the stock.
The cost-saving target
The headline number is €480 million in annual cost savings by the end of 2027. That's a substantial sum for a company of DS Smith's size, and it suggests management sees significant overlap and inefficiencies to wring out once the two businesses are combined.
Cost savings of this scale typically come from consolidating manufacturing plants, streamlining supply chains, reducing administrative duplication, and negotiating better prices with suppliers. For a packaging company, where margins are often thin and competition is fierce, such savings can be the difference between a mediocre and a strong financial performance.
International Paper also hinted at longer-term opportunities beyond the 2027 target, though it didn't provide specific figures. Investors will likely be watching to see whether the company can deliver on the near-term promise before betting on anything further out.
Why is this happening?
International Paper acquired DS Smith in a deal that closed earlier this year, creating one of the world's largest packaging companies. But soon after, the company signaled it might not keep all of its new assets. The idea of spinning off DS Smith's European operations into a separate listed company is part of a broader strategy to focus on what International Paper sees as its core strengths—likely its North American packaging business.
By carving out DS Smith, International Paper could unlock value for shareholders, as the market often values focused companies more highly than conglomerates. It also gives DS Smith its own management team and strategic direction, which can be more agile than being part of a larger group.
However, International Paper has not ruled out selling DS Smith to another buyer if a good offer comes along. That optionality means the spinoff plan is not set in stone—it's a path the company is prepared to take, but not the only one.
What it means for investors
For everyday investors, this news is a reminder that corporate breakups and spinoffs can create both opportunities and risks. When a company like International Paper announces a spinoff, it's often because management believes the parts are worth more separately than together. That can lead to a re-rating of the stock, but it also introduces uncertainty.
If you own International Paper shares, you may eventually receive shares in the new DS Smith company, depending on how the spinoff is structured. That would give you exposure to a pure-play European packaging business, which could be attractive if you believe in the region's economic recovery and the ongoing shift toward sustainable packaging.
But there are risks. The cost-saving target of €480 million is ambitious, and there's no guarantee it will be met on time. Integration of two large businesses is notoriously difficult, and cultural clashes or operational hiccups could delay the benefits. Additionally, the European economy faces headwinds, including high energy costs and sluggish growth, which could weigh on demand for packaging.
The dual listing in London and New York means the stock will be accessible to investors in both markets, but it also adds complexity. Currency fluctuations between the pound, the euro, and the dollar could affect returns for US-based investors.
For now, the key dates to watch are the completion of the separation, expected within the next 12 to 15 months, and the company's progress toward the 2027 savings goal. Any updates on a potential sale would also move the stock.
As with any corporate restructuring, it's wise to stay informed but not to make hasty decisions. The packaging industry is cyclical, and the success of this spinoff will depend on execution, market conditions, and the broader economic environment. For a deeper look at how corporate actions like this can affect your portfolio, you might find our piece on Marvell's big acquisition useful, as it illustrates how deals can reshape industries.
In the meantime, investors will be watching European markets, where packaging stocks often track the health of manufacturing and retail. If you're interested in the broader European picture, our coverage of European markets provides context on the region's economic mood.
Ultimately, the DS Smith spinoff is a story about corporate strategy and value creation. Whether it succeeds will depend on how well International Paper executes the separation and whether the new company can deliver on its promises. For now, the plan is clear, but the outcome is far from certain.
