Mondi averts bidding war for DS Smith

Mondi has bowed out of its bid to take over UK paper, packaging and recycling group DS Smith after announcing the £5bn deal, in principle, earlier in 2024.

The move comes in the face of a rival bid by International Paper, which made an all-share offer that was higher than that made by Mondi.

Rather than entering a bidding war with International Paper, on Friday Mondi’s board said: “Following a period of due diligence, and after carefully considering the value the combination with DS Smith would deliver to Mondi’s shareholders, the Mondi board has decided that the transaction would not be in the best interests of its shareholders.”

DS Smith s shares in the UK tumbled more than 12% following the announcement.

The DS Smith and International Paper tie-up is a £5.8bn all-share deal and will see International Paper seek a secondary listing in London.

Should the transaction jump all regulatory hurdles, International Paper shareholders will own about 60% of the merged entity, with DS Smith’s investors owning the rest.

Geoff Drabble, chair of DS Smith, said the company would flourish as part of a combined group with International Paper.

“The board believes the combination with International Paper represents attractive value and creates a strong investment proposition for DS Smith shareholders in the global sustainable packaging industry,” Drabble said.

“DS Smith is a high-quality business with an excellent customer focus and exceptional people. This is recognised by this combination with International Paper and the strong interest in DS Smith.”

The market cheered Mondi’s decision to walk away from the deal instead of engaging in an expensive bidding war. Its shares on the JSE gained 9.22% to close at R355.54 on Friday.

Mark Sutton, chair and CEO of International Paper, said: “Combining with DS Smith is a logical next step in International Paper’s strategy to drive profitable growth by strengthening our global packaging business.”