Sector News

International Paper makes US$7B offer for DS Smith, sparking possible bidding war with Mondi

March 30, 2024
Consumer Packaged Goods

DS Smith confirmed yesterday it is in discussions with US rival International Paper (IP) for a possible all-share takeover worth a potential £5.72 billion (US$7.22 billion). IP’s bid would trump the acquisition agreement made this month with Mondi, who offered £5.14 billion (US$6.57 billion) for a merger.

While the Mondi merger was agreed upon in principle, no formal proceedings have begun, and DS Smith could choose to change course with a better offer on the table. If IP decides to make a formal offer, it will raise the likelihood of a bidding war with Mondi.

In a statement, DS Smith’s board says that it “acknowledges the strategic merits and potential for value creation through a combination with International Paper” but that there is no certainty whether a formal offer will be made.

IP has a market capitalization of US$14.15 billion, making it larger (in valuation) than both DS Smith and Mondi.

Since the announcement, IP’s share price dropped 6.5%, while DS Smith’s rose 7.7%.

The packaging market has been undergoing a period of consolidation since Smurfit Kappa agreed to merge with WestRock in a tie-up worth an estimated US$34 billion last year.

Following that agreement, mergers and acquisitions have been on the rise. Notably, Graphic Packaging announced the sale of its Augusta, US, bleached paperboard manufacturing facility to Clearwater Paper for US$700 million.

Also, Constantia Flexibles signed an agreement to acquire approximately 57% of the shares of packaging producer Aluflexpack.

Packaging analyst Neil Farmer tells Packaging Insights: “IP is a highly ambitious company that stalked Smurfit Kappa some years ago. The deal they are proposing looks attractive.”

This will come down to shareholder value and how much further Mondi feels they can go to improve on IP`s original proposal. There is a sense in some quarters that Mondi`s original implied value of 373p per share was too low.”

By Louis Gore-Langton


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