DS Smith shares lift after Mondi takeover deal agreed

Shares in packaging firm DS Smith jumped after it agreed a £5.1 billion takeover by rival Mondi.

The mega-merger is set to create a paper and packaging giant worth more than £10 billion in value.

Last month, London’s Mondi said it was considering an approach for the rival, which makes packaging for Amazon.

The interest came around three years after speculation first arose about a potential merger between the companies.

Late on Thursday evening, the two firms told shareholders they have now agreed a deal following discussions over the past month.

The deal will see Mondi shareholders own 54% of the enlarged group, with DS Smith’s investors owning the remaining 46%.

It represents an implied value of 373p per DS Smith share, around a third higher than its value on February 7, before the talks were first announced.

The companies said it “is an exciting opportunity to create a pan-European industry leader in paper-based sustainable packaging solutions, with complementary geographic footprints, leading customer relationships, a strong balance sheet and cash flow profile, and the potential to deliver substantial benefits to respective shareholders”.

Victoria Scholar, head of investment at Interactive Investor, said: “The tie-up would allow both to benefit from economies of scale in a competitive sector within a world that is becoming more and more dependent on Amazon deliveries.

“Just this week, DS Smith signalled that market conditions were challenging with a weak performance in northern Europe in particular.

“Last year it reduced its packages prices to try to spur demand.

“So perhaps inorganic growth is the best way forward to spur growth and increase its market share.”

DS Smith shares jumped by 6.2% on Friday morning as a result. Meanwhile, Mondi shares dipped 1.9%.