Mondi and DS Smith have announced an agreement in principle on the key financial terms of a potential all-share offer by Mondi for DS Smith. This agreement, known as the Combination, would see Mondi acquire the entire issued and to be issued share capital of DS Smith.
The proposed terms of the Combination include Mondi shareholders owning 54% and DS Smith shareholders owning 46% of the issued and to be issued share capital of Mondi. Based on Mondi’s closing share price of 1,381 pence per share on February 7, 2024, the implied value of the offer would be 373 pence per DS Smith share, representing a 33% premium to DS Smith’s closing share price of 281 pence per share on the same date.
If the Combination proceeds, Philip Yea would become the Chair, Andrew King the Chief Executive Officer, and Mike Powell the Chief Financial Officer of the combined Mondi Group. Additionally, three Non-Executive Directors of DS Smith are expected to join the Mondi Group Board.
Both Mondi and DS Smith see compelling strategic and financial benefits in the Combination. It would create a pan-European industry leader in paper-based sustainable packaging solutions, with a strong balance sheet, cash flow profile, and potential for substantial benefits to shareholders, customers, employees, and stakeholders.
The Combination would increase exposure to sustainable packaging growth trends, create a leading player in corrugated packaging across Europe, and enhance vertical integration. It would also strengthen the ability to serve global FMCG customers and drive innovation in packaging sustainability.
The Boards of both companies are currently undertaking an exercise to validate the expected synergies from the Combination, which are believed to arise from vertical integration and complementary positions in containerboard, corrugated solutions, and flexible packaging.
The deadline for Mondi to announce a firm intention to make an offer for DS Smith has been extended to April 4, 2024, to allow for continued discussions regarding the Combination. However, there is no certainty that a firm offer will be made.