DEFA14A: International Paper Addresses Lawsuits and Demand Letters Regarding DS Smith Acquisition

International Paper supplements its proxy statement to address lawsuits and demand letters related to its proposed acquisition of DS Smith, aiming to mitigate potential delays and uncertainties.

Summary

• International Paper filed a definitive proxy statement on September 12, 2024, regarding the proposed share issuance for the acquisition of DS Smith.
• Following the filing, lawsuits were filed on September 19 and 20, 2024, alleging omissions of material information in the proxy statement.
• Additionally, between September 4 and September 27, 2024, demand letters were sent by purported shareholders making similar allegations.
• To mitigate risks and costs associated with the lawsuits and demand letters, International Paper is voluntarily supplementing the proxy statement.
• The supplemental disclosures include revisions to the financial analyses of DS Smith and International Paper, specifically regarding selected publicly traded companies, precedent transactions, discounted cash flow analysis, and Wall Street research analysts' price targets.
• The company maintains that the claims are without merit and no supplemental disclosure is legally required.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While the company is facing legal challenges, it is proactively addressing them. The outcome of the acquisition remains uncertain.

Positives

• International Paper is proactively addressing concerns raised in lawsuits and demand letters to minimize potential disruptions to the DS Smith acquisition.
• The company is providing additional information to shareholders, even while maintaining that the original proxy statement was sufficient.
• The supplemental disclosures aim to reduce uncertainty and potential delays in the acquisition process.

Negatives

• The lawsuits and demand letters indicate potential shareholder dissatisfaction or concerns regarding the disclosures related to the DS Smith acquisition.
• The need for supplemental disclosures suggests that the original proxy statement may have been perceived as incomplete or misleading by some parties.
• Legal challenges and the associated costs could potentially impact the overall financial benefits of the acquisition.

Risks

• The lawsuits could potentially delay or prevent the closing of the acquisition of DS Smith.
• Unfavorable court rulings could result in financial damages or require the company to rescind the acquisition.
• The need for ongoing legal defense and potential settlement costs could negatively impact International Paper's financial performance.
• Failure to obtain shareholder approval for the share issuance could jeopardize the acquisition.

Future Outlook

The document contains forward-looking statements regarding the anticipated financial results, economic conditions, industry trends, future prospects, and the execution, consummation, and anticipated benefits of corporate transactions or contemplated acquisitions, including the pending acquisition of DS Smith Plc.

Industry Context

The document references publicly traded corrugated packaging companies such as Smurfit Kappa Group plc, Mondi plc, Packaging Corporation of America, WestRock Company, and Graphic Packaging Holding Company, indicating the competitive landscape in which International Paper and DS Smith operate.

Comparison to Industry Standards

• The document compares International Paper and DS Smith to industry peers using metrics like enterprise value to adjusted EBITDA multiples.
• For selected publicly traded companies, the enterprise value to calendar year 2024 adjusted EBITDA multiples were 7.3x to 7.4x for Smurfit Kappa Group plc and Mondi plc, while DS Smith was observed at 7.5x.
• For International Paper, the enterprise value to calendar year 2024 adjusted EBITDA multiples were compared to Packaging Corporation of America (11.2x), WestRock Company (7.5x), and Graphic Packaging Holding Company (7.6x).
• Selected precedent transactions involving acquisitions of publicly traded corrugated packaging companies since 2012 were analyzed, with enterprise value to adjusted EBITDA multiples ranging from 6.2x to 13.1x.

Legal Proceedings

• Lawsuits were filed in the Supreme Court of the State of New York alleging negligent misrepresentation and concealment in violation of New York State common law.
• Plaintiffs are seeking to enjoin the defendants from consummating the Acquisition until certain allegedly material information is disclosed or, in the event the Acquisition is consummated, to rescind the Acquisition or recover actual and punitive damages.

Stakeholder Impact

• Shareholders are impacted by the potential dilution from the share issuance and the outcome of the acquisition.
• Employees of both International Paper and DS Smith could be affected by the integration of the two companies.
• Customers and suppliers may experience changes in the supply chain and product offerings as a result of the acquisition.

Next Steps

• International Paper will continue to defend against the lawsuits and respond to the demand letters.
• The company will seek shareholder approval for the share issuance at the special meeting on October 11, 2024.
• International Paper will continue to work towards closing the acquisition of DS Smith, subject to regulatory approvals and other customary closing conditions.

Key Dates

Keywords

DS Smith, Acquisition, Proxy Statement, International Paper, Share Issuance, Lawsuits, Demand Letters, Supplemental Disclosure