Packaging: Mondi interested in DS Smith takeover

Last Updated: 12. Februar 2024By

On the past Thursday (08.02.2024), the share price of the British packaging manufacturer DS Smith surged by nearly 10% on the London Stock Exchange (LSE). This price rally was triggered by a brief market announcement from the packaging manufacturer.

In this statement, the DS Smith board confirmed receiving a „very preliminary expression of interest“ from competitor Mondi plc regarding a potential combination with DS Smith. This merger would create a packaging company with a value of over 10 billion British pounds (GBP – more than 11.7 billion euros).

But before delving into the potential merger between the leading corrugated cardboard manufacturers, let me briefly introduce the two companies to you.

The companies involved in a nutshell DS Smith was founded by the Smith family in the 1940s in East London. According to its own statements, the company is one of the world’s leading providers of sustainable, fiber-based packaging made of corrugated cardboard. In addition, DS Smith is also active in the areas of recycling and paper production.

The company’s shares have been listed on the London Stock Exchange since the late 1950s. DS Smith operates in more than 30 countries and employs around 30,000 people. DS Smith also has a variety of plants (paper mills, recycling plants, etc.) and sales offices in Germany.

In the 2022/23 fiscal year, which ended on April 30, 2023, the company generated revenue of 8.22 billion GBP (equivalent to approximately 9.62 billion euros). Operating profit (EBIT) was 722 million GBP (approximately 845.2 million euros).

Mondi plc, founded in 1967, is a listed packaging and paper manufacturer with headquarters in Vienna, Austria and Weybridge, England (located about 40 km southwest of London).

The company’s roots are in Durban, South Africa. The company’s shares are listed on both the London Stock Exchange and the Johannesburg Stock Exchange (South Africa).

Mondi employs 22,000 people in 100 production facilities in 30 countries. In Germany, the company operates a total of nine plants and two sales offices. The company employs around 2,000 people at its German locations.

In the 2022 fiscal year, Mondi generated annual revenue of over 8.9 billion euros. EBIT was 1.7 billion euros.

The non-binding inquiry in detail In its statement, DS Smith emphasizes that it has not received a concrete takeover offer, but only a „preliminary expression of interest from Mondi plc regarding a combination with DS Smith.“ The statement was made because the media had already speculated about a potential takeover.

Under British law, Mondi is now required to either announce a firm intention to make a takeover offer for DS Smith by March 7, 2024, or to state that the company does not intend to make an offer.

Market reaction The market reacted promptly: The share price of DS Smith on the LSE jumped by 9.8% to 308.60 British pence (GBp) on 08.02.24. However, the situation was quite different for Mondi. Its share price on the LSE fell by -3.3% during the day and closed at 1,336 GBp.

What could happen next Whether Mondi will actually make a concrete takeover offer for its competitor DS Smith remains to be seen. It is also unclear whether a possible offer will actually lead to a takeover.

However, it is certain that Mondi must make a takeover offer or declare its waiver of a potential takeover by March 7.

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