International Paper: sell Europe or spin it off?
International Paper must decide whether to sell its European packaging business, complete its spin-off or set a price and spin it off unless a bidder beats it
Original Business Case Weekly articleInternational Paper must decide whether to sell its European packaging business, complete its spin-off or set a price and spin it off unless a bidder beats it
On 31 January 2025 International Paper, which makes about a third of North America's corrugated packaging, completed its purchase of DS Smith, a British packaging maker, paying in shares worth about $9.9 billion. In January 2026 it announced that it would split into "two independent, regionally focused companies", spinning off DS Smith together with International Paper's own plants in Europe, the Middle East and Africa as a new company to be listed in London and New York. On 15 October 2026 International Paper confirmed early talks with would-be buyers who had approached it unprompted, while work on the spin-off continued. The Financial Times reported that two private-equity firms, Lone Star and Atlas Holdings, were exploring separate bids that could value the business at less than $6 billion, about €5.4 billion at the European Central Bank's rate on 3 November.
The choice, 4 November 2026
The European business is making operating losses. In the third quarter its sales fell from $2.31 billion a year earlier to $2.28 billion, and its operating loss widened from $58 million to $73 million. In the same quarter International Paper wrote down $1.38 billion of the goodwill it carries for the business. Andy Silvernail, the chief executive, told analysts on 28 October that in Europe "natural gas costs rose sharply, and consumers remain cautious".
On 3 November the managers who would run the new company, to be called DS Smith plc, set out their targets. They expect adjusted EBITDA (operating profit before depreciation, amortisation and one-off costs, a different measure from the operating loss) of €730–780 million in 2026, a margin of 9–9.7 per cent. Over the medium term they aim for a margin in the mid-teens, and they expect €480 million of yearly savings by the end of 2027. The company would start with €1.8 billion of net debt, about 2.4 times this year's expected EBITDA.
The board has three options. It can sell to the best bidder: International Paper gets the price in cash, and the buyer takes on the business's losses and gas costs; but shareholders give up any value the savings plan adds beyond that price. It can complete the spin-off: shareholders receive shares in DS Smith plc, International Paper keeps about 20 per cent, and both share in any gain from the savings; but no sale price comes in, and the value of those shares depends on a plan that has yet to work. Or it can set a minimum price and spin off unless a bidder beats it: shareholders get at least that price or the spin-off; but a price set too low sells the business cheaply, and staff and customers wait longer than under a straight spin-off to learn who will own it.
Your call
It is 4 November 2026 and you sit on International Paper's board. Two private-equity firms are reported to be exploring bids that could value the European packaging business at less than $6 billion, while International Paper prepares to list it in London and New York as DS Smith plc. You can sell to the best bidder, complete the spin-off or set a minimum price and spin off unless a bidder beats it. Say which you recommend and what International Paper's shareholders would gain and give up under it, and name a fact or result that would change your recommendation.