A potential bidding war is brewing in the paper and packaging industry as International Paper, a New York-listed paper producer, gears up to launch a counterbid for DS Smith, a British-based packaging group. This move comes in response to an agreed offer from Mondi, a London-listed paper group, to acquire DS Smith for £5.1 billion.
If International Paper proceeds with a formal offer, it is expected to include a significant stock-based component, setting the stage for a multibillion-pound transatlantic bidding war for DS Smith. Mondi had announced its exploration of an offer for DS Smith in February and later reached an agreement to acquire the company at an implied 373p-a-share.
However, some shareholders and analysts have criticized the Mondi proposal as being undervalued, leaving room for potential rival bids. City insiders revealed that International Paper may have already submitted an indicative proposal to DS Smith and its advisers.
The exact value of International Paper’s potential offer remains unclear, but industry bankers suggest it could be pitched at north of 400p-a-share and potentially around 420p-a-share. This move comes amid a trend of industry consolidation, with the Irish group Smurfit Kappa’s $20 billion deal with WestRock of the US last year, creating the world’s largest paper and packaging group by sales.
The proposed deal with Mondi would result in DS Smith’s shareholders owning 46% of the combined group, while Mondi’s shareholders would own 54%. This potential bidding war for DS Smith follows a series of recent corporate takeover activities in the sector, driven by the opportunity to extract synergies after a period of rising input prices.
