Mondi confirms interest in DS Smith tie-up
UK- and SA-listed paper firm Mondi has expressed interest in buying DS Smith, a UK-listed global paper and cardboard box manufacturer.
After a statement by DS Smith on the approach, Mondi confirmed it was in the early stages of considering a tie-up.
Reuters reported the firms would create a paper giant worth as much as $13bn (R246bn).
DS Smith operates in more than 34 countries and is a leader in corrugated cardboard boxes, which refers to cardboard made of multiple layers. Mondi, which operates in more than 30 countries, focuses on paper. All DS Smith’s cardboard is recyclable.
Mondi also said the firms are “highly complementary”, and a merger would help it benefit from “structural growth trends in sustainable packaging”.
LOW-COST MILLS
Mondi said it routinely considers options aimed at “accelerating its growth in the packaging sectors”.
The FT reported that a merger would create Europe’s largest containerboard maker by matching Mondi’s low-cost paper mills with DH Smith’s box factories. It would also relieve pressure on Mondi’s fine-paper business, which has sold lower volumes due to work-from-home trends, the FT reported.
Mondi said it has a “disciplined” approach to acquisitions and any transaction would be assessed against its capital allocation framework.
“Mondi remains committed to maintaining a strong and stable financial position supported by a solid investment-grade credit rating and a dividend policy aimed at offering shareholders long-term dividend growth.”
Mondi, which was formed in SA in 1967, has a primary listing on the London Stock Exchange (LSE) and a secondary one on the JSE, where it has a market cap of about R139bn. Mondi’s share price on the JSE dropped about 4.63% after the news.
NO PROPOSAL
In terms of the UK’s takeover rules, Mondi must announce a firm intention to make an offer for DS Smith or walk away by 5pm on March 7.
DS Smith said earlier on Thursday: “The board of DS Smith understands that Mondi is considering a possible offer for DS Smith, although no proposal has been received at this stage.
“There can be no certainty as to whether any proposal will be made or the terms of any such proposal.”
DS Smith share price was up almost 11% in midafternoon trade on the LSE, having jumped as much as 13%. Mondi’s share price fell 1.74% to R324.39 at the close on the JSE.
Packaging companies benefited from the demand for boxes in the Covid-19 online shopping boom when consumers stayed away from shopping malls and the high street.