Lone Star, Atlas Eye $6B Deal for Former DS Smith Unit

Private equity powerhouses Lone Star and Atlas Holdings are reportedly in advanced discussions to acquire International Paper's European packaging division, a business formerly known as DS Smith. This potential transaction, valued at approximately $6 billion, could sidestep the previously announced plans for a public listing of the European operations.

The move comes as International Paper navigates a challenging market for packaging assets. The company acquired DS Smith for £7.8 billion (including debt) in 2024. However, a sale at the current valuation would represent a significant decrease, reflecting a broader industry downturn. Demand and pricing for packaging materials have softened considerably since their pandemic-era peaks, impacting profitability across the sector. This market pressure is underscored by International Paper's recent recording of a nearly $2.5 billion goodwill impairment charge against its Europe, Middle East, and Africa segment.

Lone Star, with its substantial $96 billion in committed capital, and Atlas Holdings, managing over $16 billion and with a track record of acquiring UK businesses like banknote printer De La Rue, are understood to be the final contenders for the European packaging assets. Their interest signals a potential shift away from International Paper's initial strategy of carving out the European business into a separately listed entity, which had envisioned listings in both London and New York.

International Paper has acknowledged receiving unsolicited interest and is engaged in preliminary talks with potential buyers. However, the company maintains that it is continuing to pursue its separation and initial public offering (IPO) plans concurrently. The outcome of these discussions remains uncertain, with International Paper emphasizing that there is no guarantee a deal will materialize.

The European packaging market, a critical segment within the broader industrials sector, has seen increased consolidation and strategic repositioning. Companies are adapting to evolving consumer preferences and supply chain dynamics. The potential acquisition by Lone Star and Atlas Holdings could lead to significant operational changes and investment aimed at optimizing the business for future growth, particularly in light of the sector's cyclical nature and the ongoing need for efficiency improvements.

This development highlights the active role of private equity in reshaping established industrial assets. Firms like Lone Star and Atlas Holdings often bring operational expertise and capital to drive value creation, especially in sectors undergoing transition. The valuation of the DS Smith assets will be closely watched as an indicator of market sentiment and the perceived long-term prospects for European packaging manufacturers.