April 08, 2024 | Materials | Europe | Active

DS Smith / Mondi: Deal Insight

On 26-Mar-24, International Paper (IP US) proposed to acquire its British rival, DS Smith, with the aim of competing with an earlier proposal from Mondi. IP has proposed exchanging 0.1285 of its shares for each DS Smith share, initially resulting in an offer value of 415p per share, implying a 47.7% premium to DS Smith’s closing price on 7-Feb-24, which was the target’s last undisturbed date. Under the proposed terms, DS Smith shareholders would own 33.8% of the combined group, with IP shareholders holding the remaining 66.2%. IP, headquartered in Tennessee, indicated that discussions with DS Smith are ongoing, but emphasised the standard caveat that “there can be no certainty that any offer will ultimately be made.” Under UK takeover law, a put-up-or-shut-up (“PUSU”) date has been established for 23-Apr-24, by which IP must either submit a formal offer or declare its intention not to do so. DS Smith’s board has confirmed that it “acknowledges the strategic merits and potential for value creation through a combination with International Paper”, while also noting that discussions with Mondi are continuing. DS Smith had confirmed media speculation regarding discussions with Mondi on 8-Feb-24, after which UK-based Mondi stated that “it is in the early stages of considering a possible all-share combination.” With Mondi facing a PUSU deadline of 7-Mar-24 (subsequently extended twice, to 4-Apr-24, and now, to 23-Apr-24), Mondi and DS Smith jointly disclosed that they had reached an “agreement in principle” on the key financial terms of a potential all-share offer. Under this agreement, Mondi shareholders would hold 54% of the combined entity, while DS Smith shareholders would retain the remaining 46%. Although the DS Smith / Mondi merger ...

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