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International Paper has made a takeover proposal for UK paper and packaging group DS Smith, opening up the possibility of a bidding war for the company, which had already reached a deal with competitor Mondi.
US-based International Paper’s all-share proposition for DS Smith is equivalent to 415p per share, which would value the company at roughly £6.8bn including debt.
UK-listed Mondi earlier this month agreed in principle a tie-up with DS Smith that implied a value of 373p per share, or closer to a £6.2bn enterprise value.
DS Smith’s board said in a statement that it “acknowledges the strategic merits and potential for value creation through a combination with International Paper”, though cautioned that there was no certainty whether a full offer would be made.
The company also said it was continuing its talks with Mondi.
International Paper said in a statement that a merger would create a new global leader in sustainable packing that would be well positioned in growing markets.
Under the talks with Mondi, DS Smith shareholders would hold 46 per cent of the new group, while the scenario with International Paper would leave them with a 34 per cent stake in a combined company.
International Paper’s offer marks a 48 per cent premium to the value of DS Smith’s share price at the close of trading on February 7, just before the Mondi approach became public, and comes amid a bout of consolidation in the sector.
International Paper had been the biggest listed company in the sector by sales until Irish group Smurfit Kappa agreed a $20bn tie-up with US group WestRock in September last year.
After enjoying a boom during the coronavirus pandemic, when lockdowns led to a surge in parcel deliveries, the packaging industry has faced falling demand as well as rising costs.
International Paper has about 39,000 employees and generated around $18.9bn in net sales last year. The company, founded in 1898 and based in Memphis, Tennessee, was worth about $18bn including debt in trading on Tuesday.
Earlier this month the company announced a new chief executive, Andrew Silvernail, would join the group in May from an advisory role at private equity group KKR.
International Paper had itself previously bid for Smurfit Kappa in 2018 before dropping its pursuit after two takeover offers were rejected.
Sky News earlier reported International Paper’s interest in DS Smith.
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