David S Smith could become one of Europe’s largest packaging companies if chief executive Peter Williams succeeds with a £900m bid for Dutch competitor KNP.
Analysts see £1.18bn turnover Smith as front-runner in an auction organised by ING Barings for KNP. This is despite Smith relying on venture capital to secure equity for the purchase.
Depressed paper prices have forced a rapid consolidation in Europe’s packaging industry, with acquisitions by the two largest companies, Sweden’s SCA and Jefferson Smurfit of Dublin.
Analysts said Smith-KNP would be a serious competitor for SCA and Smurfit in the fields of corrugated board and container board.
Smith has 11,000 employees, 32% of them outside the UK. KNP has a milling operation in Birmingham, and rationalisation would be expected if the Smith deal comes off.
When Peter Williams took the helm at Smith in 1991, his restructuring sent shares almost trebling in value to 340p. They have since slid back to 200p, because of the strong pound and depressed trading conditions.
Despite volume growth across the industry, Smith’s turnover for the half year to November fell by 9.8% to £555m. Operating profit was down by 46.4% to £34m.
Smith’s most recent investment was its acquisition last year of a 38% stake, with provision to go to 100%, in Israeli advanced plastic film producer Stepec.