Is International Paper a Good Long-Term Investment? IP Growth, Profitability and Risks

On 15 October 2026 International Paper confirmed it is in discussions with potential buyers for its EMEA packaging business — the former DS Smith — after receiving unsolicited approaches, while continuing to pursue the spin-off it announced earlier. The Financial Times reported that Lone Star and Atlas Holdings are the two remaining suitors after other private equity groups withdrew, and that offers may value the business at less than USD 6bn. Shares closed 6.9% higher at USD 34.10, from USD 31.90 the previous session.

Anyone asking whether International Paper is a good long-term investment now has a harder piece of evidence to work with than any broker note could supply. International Paper recorded total purchase consideration of approximately USD 9.9bn when it completed the DS Smith acquisition on 31 January 2025, based on its closing share price of USD 55.63 that day. If the reported bids are anywhere near accurate, the market is being invited to mark that asset at something closer to USD 6bn — within two years, and by buyers who do this for a living. What follows is an attempt to work out what that gap says about the company's capital allocation record and what a cash sale would and would not fix. It is a description of the evidence, not advice on the shares.

What actually happened

International Paper's statement was a response to press speculation and share-price movement rather than a voluntary announcement, and its wording is carefully bounded. The approaches were unsolicited. The process is at an early stage. There is "no assurance" as to the timing or structure of the proposed separation. Critically, the company said it is progressing the spin-off and evaluating the potential sale in parallel — it has not switched tracks, it has added one.

The spin-off route, as previously set out, would see the EMEA business listed independently in London under the revived DS Smith plc name, with a Level II American depositary receipt programme on the New York Stock Exchange, and the separation targeted for early 2027. A DS Smith Capital Markets Day is scheduled for 3 November 2026. That date now carries far more weight than it did a week ago: it is either the launch event for an independent London-listed packaging group or an awkward meeting about a business being sold out from under the plan.

International Paper did not name any bidder and did not disclose a price. Lone Star declined to comment when approached by Reuters; Atlas Holdings did not respond. So the "less than USD 6bn" figure rests on the FT's reporting and remains unconfirmed by any of the three parties. It should be read as the best available indication of where the bids sit, not as an agreed valuation.

For context on what is being sold: International Paper agreed to acquire DS Smith in April 2024 in an all-share deal reported at about GBP 5.8bn in equity value, issuing 0.1285 new International Paper shares for each DS Smith share. On completion it issued roughly 178.1m new shares, leaving former DS Smith holders with approximately 34.1% of the combined company. The consideration recorded in the accounts — USD 9.9bn — is higher than the April 2024 headline because International Paper's own share price had risen substantially between announcement and completion. The company paid in a currency that appreciated, which inflated the price of the asset without changing the asset.

Why the market reacted the way it did

A 6.9% single-day gain on news that an asset might be sold for materially less than it cost looks contradictory until you separate the asset's value from the shareholder's outcome.

A spin-off hands International Paper shareholders stock in a cyclical European containerboard and box business. It does not raise a penny. Shareholders who do not want European packaging exposure have to sell it themselves, into a market that will know exactly how many forced sellers are coming. A cash sale, by contrast, converts the same asset into balance-sheet capacity at a single clearing price, with no overhang and no listing risk — and it does so without International Paper having to persuade the London market to assign the business a respectable multiple.

That is what the market bid up: not the valuation, but the certainty and the form of the proceeds. The uncomfortable corollary is that investors appear to prefer cash at a mark-down to equity at an unknown multiple — which is itself a judgement on what the EMEA business would have been worth as a standalone listing.

The Openbook read

Momentum

Event-driven and fragile. A 6.9% move on a company-confirmed early-stage approach is not a trend, and the company has explicitly declined to guarantee timing or structure. Momentum built on an unconfirmed price from a single news organisation unwinds quickly if the process stalls. Treat the move as a repricing of optionality rather than a change in direction.

Growth

Weak, and the guidance says so. Second-quarter net sales were USD 6.00bn. Management's third-quarter adjusted EBITDA target was USD 780-830m, including an USD 85m hit from the temporary closure of the Pine Hill, Alabama mill, against a full-year 2026 target of USD 3.20-3.40bn. Those are the numbers of a business managing capacity down, not one growing into demand. Whatever the EMEA separation achieves, it does not add growth; it changes which shareholders own which cyclical exposure.

Profitability

Adequate but flattered by the basis on which it is reported, and this deserves care. The USD 587m second-quarter figure is adjusted EBITDA from continuing operations — not GAAP, not total company. On USD 6.00bn of net sales that is a margin of roughly 9.8%. For a converting and containerboard business with this asset base, high single digits is a workmanlike result rather than a strong one, and it is being delivered while the group carries the integration costs of an acquisition it may now partially reverse.

Solvency

This is the factor the news actually moves, and the second-quarter cash statement shows why. Operating cash flow was USD 526m. Free cash flow was negative USD 7m. The entire operating cash generation of the quarter was consumed by capital expenditure and working capital, leaving nothing for debt reduction, and that is before any separation costs. A cash sale of the EMEA business at even a disappointing price would transform that picture at a stroke; a spin-off would improve it only to the extent that the spun entity carries debt with it. On the evidence of the cash flow statement, the preference for cash is not greed — it is arithmetic.

Reward / Risk

Asymmetric, and not in the direction the share price move implies. The reward case is straightforward: a sale at any credible price de-risks the balance sheet, removes execution risk on a dual listing, and lets a slimmer North American business be valued on its own merits. The risk case is that the gap between USD 9.9bn of recorded consideration and a reported sub-USD 6bn bid is not a market dislocation but a verdict — on European containerboard economics, on the synergies underwriting the original deal, and on the judgement that committed 34.1% of the company's equity to acquiring it. A sale crystallises that verdict permanently. The spin-off, for all its awkwardness, at least leaves shareholders holding the option to be proved right later.

The five factors therefore point to a company whose balance sheet improves on either path and whose capital allocation record does not. Those are separable questions, and the long-term-investment question is mostly the second one.

The read-across

The clearest implication is for European packaging valuations generally. If two experienced financial sponsors — having seen the data room — land below USD 6bn for the largest independent containerboard and box platform in Europe, that is a datapoint for every listed peer. Mondi, Smurfit Westrock and Packaging Corporation of America are all, in part, priced off assumptions about European box pricing and capacity discipline. A low clearing price for DS Smith's assets makes those assumptions harder to defend; a withdrawn process at that level would, oddly, be the more reassuring outcome for peer multiples.

There is a London market consequence too. The spin-off was set to deliver a substantial new packaging listing to the LSE — a rare event, and one the exchange has been publicly keen on. A sale to private equity removes it, and takes a mid-to-large-cap industrial out of the UK public market rather than adding one. That is a read-across for the listings debate as much as for the sector.

Finally, it is a read on private equity appetite for European industrials. Sponsors have been slow to deploy into cyclical manufacturing at prices vendors would accept. Two firms competing at a level well below the vendor's own book value suggests the bid-ask in that market has narrowed from the buyer's side, not the seller's.

What to watch next

• Third-quarter results on 28 October 2026, before the New York open, with the webcast at 10am ET. The first scheduled opportunity for management to be questioned on the sale process, and on whether the USD 780-830m adjusted EBITDA target survived the Pine Hill closure.
• The DS Smith Capital Markets Day on 3 November 2026. Whether it proceeds, is postponed, or is reframed is the single cleanest signal on which track is winning. A full standalone equity story presented on 3 November implies the sale talks have not progressed.
• Any confirmation of bidder or price. Neither Lone Star nor Atlas has commented, and International Paper has named neither. A company-confirmed figure would replace the reported sub-USD 6bn with something corroborated — and would set the mark against the USD 9.9bn carried from completion.
• The early-2027 separation window. The company has said it cannot assure timing or structure. Slippage beyond the first part of 2027 would indicate the two parallel tracks are interfering with each other rather than competing cleanly.
• Free cash flow. After a negative USD 7m quarter, the next cash flow statement is the test of whether the balance sheet needs the sale or merely benefits from it. That distinction decides how much negotiating room International Paper actually has.

The approach is not the story. The story is that an asset acquired for USD 9.9bn of shareholder equity two years ago is being discussed at a fraction of it, and that the share price went up on the news. Investors screening paper and packaging on our screener should take the second fact as seriously as the first.