Mondi inks R123 billion deal to create packaging giant

Mondi agreed to buy DS Smith for £5.1 billion (R123 billion) in a deal that would create one of the world’s largest makers of packaging.

The all-stock deal has an implied value of 373 pence a share. That’s a 33% premium compared with DS Smith’s price on Feb. 7, the day before the company said it had received an initial approach from Mondi.

DS Smith rose as much as 7.6% early Friday, trading below the offer price at 344 pence, with Mondi down 3.4%.

If the in-principle agreement is completed, the combination would generate cost savings as well as benefits from greater scale as the packaging industry consolidates, the companies said in a statement.

Rival Smurfit Kappa Group Plc last year agreed to acquire WestRock Co. to create an Irish-American powerhouse.

The sector benefited from a surge in demand during the pandemic as consumers under lockdown ordered more goods online. However, demand has since fallen back as shoppers returned to physical stores.

Mondi shareholders would own 54% of the combined company, with DS Smith shareholders getting the rest.

DS Smith shares closed Thursday at 325.2 pence, 15% below the agreed price before the statement was released.

Cereal and amazon

DS Smith traces its roots back to a box-making business started by the Smith family in East London in 1940. It is one of the world’s largest cardboard box makers and produces packaging for everything from cereal boxes to Amazon parcels.

Mondi began life in South Africa as part of Anglo American when the mining company built a mill there. In 2021, Mondi explored a takeover of DS Smith, Bloomberg reported, although talks with its advisers did not lead to a deal at the time.

Under UK takeover rules, Mondi had until Thursday to make a firm offer for DS Smith or walk away. Alongside the agreement in principle, it said Thursday that the deadline had been extended to April 4 to formalize the offer.