DS Smith Plc experiences a surge in its stock value following confirmation of negotiations with American competitor International Paper Co., setting the stage for a potential bidding confrontation for the UK-based packaging company.
International Paper is contemplating an all-stock proposition amounting to £4.15 per share, thus valuing DS Smith at £5.7 billion ($7.2 billion). This development comes after Mondi Plc recently agreed to a £5.1 billion acquisition of its UK counterpart.
Amidst confirmation of the talks, DS Smith’s shares climbed more than 7% during early trading on Wednesday, while International Paper experienced a decline of up to 6.5% on Tuesday in New York.
The paper and packaging industry has been witnessing consolidation, exemplified by Smurfit Kappa Group Plc’s agreement last year to merge with WestRock Co., creating a formidable Irish-American entity. The sector enjoyed a surge in demand during the pandemic as online shopping intensified, although demand tapered as consumers reverted to physical stores.
DS Smith disclosed that its shareholders would receive 0.1285 shares in International Paper for each DS Smith share held. This proposal presents a 48% premium over the closing price on Feb. 7, the day before Mondi’s initial approach, which itself represented a 33% premium.
Notably, International Paper made an attempt in 2018 to acquire Smurfit Kappa, aiming to establish Europe’s largest cardboard box producer.
In a separate development, activist investor Primestone Capital urged Smurfit Kappa’s management last year to explore alternative options, including a potential merger with International Paper, rather than the proposed WestRock acquisition, as outlined in an open letter to the Irish packaging manufacturer’s management.