FTSE packaging giants strike up £11bn merger

MONDI and DS Smith will join forces to create an £11bn packaging giant employing more than 50,000 staff.

FTSE 100 group Mondi has agreed to pay £5.14bn for smaller rival DS Smith.

the proposed blue-chip merger comes amid a takeover frenzy in the City following nationwide’s £2.9bn bid for virgin Money on thursday and a £2.5bn tie-up between housebuilders Barratt Developments and redrow last month.

the deal follows a £15bn mega-merger between packaging firm Smurfit Kappa and US competitor Westrock that was announced in 2023.

DS Smith employs more than 30,000 workers and has been listed since 1986. the company makes products such as trays to carry cans and bottles, and packaging for food.

Mondi listed in London in 2007. it has 22,000 staff in more than 30 countries.

it makes wooden containers, printing paper and cardboard boxes. Paper packaging firms have struggled over the past year as customers reduced their stocks amid a slowdown in online shopping.

the offer of 373p per DS Smith share is a premium of 33pc on the company’s share price of 281p on February 7. But it is less than a recent peak of 461p recorded in 2021.

victoria Scholar, head of investment at broker interactive investor, said: ‘Shares in DS Smith had been somewhat in the doldrums, slowly retreating from the highs in 2021, providing an attractive opportunity for Mondi to snap up its shares at a discount.’ Mondi shareholders will own 54pc of the combined company, and DS Smith shareholders will take a 48pc stake.

Davy research analyst Justin Jordan said: ‘anticipating limited regulatory hurdles or thirdparty interloper risks, we believe the proposed merger benefits both Mondi and DS Smith shareholders.’

Steve Clayton, head of equity funds at Hargreaves Lansdown, said: ‘the groups say they can see substantial synergies from combining operations but, bizarrely at such a late stage in a deal’s progression, they have not yet quantified these synergies.

‘that will come later and, in the meantime, investors in both companies are left to figure out if they are going to be sufficient to merit DS Smith investors giving up control of the group and Mondi investors roughly halving their exposure to the assets they own. this does not look like a deal-making trend that is likely to catch on.’

‘Benefits both sets of shareholders’