A joint announcement on the London Stock Exchange yesterday (7 March) revealed that the two companies have struck an agreement in principle on the “key financial terms” of a merger.
If the deal goes ahead, Mondi would own a 54% stake in the company with the remainder of the shares (46%) being owned by DS Smith.
Under the proposed terms announced in the deal, shares for DS Smith will stand at 373 pence per share, a premium of 33%. The financial press have valued the deal at £5.1 billion.
The agreement remains subject to various conditions including regulatory approval and satisfactory due diligence from both parties.
Rumours
Rumours have circulated about Mondi’s interest in DS Smith for a number of years. Speculation in 2021 saw an increase in DS Smith’s share price (see letsrecycle.com story)
While Mondi serves as a paper supplier to the UK market, it doesn’t have any mills that are located within the UK. Instead, Mondi operates OCC mills in Sweden, the Czech Republic, Poland, Finland, Russia, Turkey, and South Africa.
DS Smith sold four of its UK sites to Veolia last year (see letsrecycle.com story) but retained the Kemsley facility, which it announced £48 million of investment into last month (see letsrecycle.com story).
Benefits
According to yesterday’s statement, a merger of the two companies would create “a leading player in corrugated packaging across Europe”.
The statement added that combining both Mondi’s and DS Smith’s strengths in the corrugated value chain would also provide “strategically located and integrated recycled containerboard production”.
The deal would also see “significant value creation for both Mondi and DS Smith shareholders from substantial synergies”.
Another listed benefit was a “commitment to sustainability in packaging with a complementary portfolio of products, joining forces to spearhead the shift towards a more circular and sustainable economy.”
Leadership
The leadership structure of the merged Mondi Group would see Philip Yea as chair, Andrew King as chief executive officer, and Mike Powell as chief financial officer. Additionally, three non-executive directors from DS Smith are expected to join the enlarged Mondi Group Board.
Deadline
The announcement states that the current deadline for Mondi to announce a firm intention to make an offer for DS Smith has been extended to April 4, 2024, as per the request of the DS Smith Board.
This extension provides the parties with additional time to continue discussions regarding the potential merger.
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