Johannesburg- and London-listed paper and packaging giant Mondi has reached an agreement in principle on a proposed £5.1-billion merger with London-listed sustainable packaging company DS Smith.
Under the terms of the proposed merger, Mondi shareholders would own 54% of the enlarged Mondi group and DS Smith shareholders 46%.
Based on Mondi’s closing share price of £13.81 on February 7, the terms of the combination represent an implied value of £3.73 per DS Smith share and a premium of 33% to DS Smith’s closing price of £2.81 on the same day.
Philip Yea, Andrew King and Mike Power will serve as chairperson, CEO and CFO of the enlarged Mondi group, respectively, with the nonexecutive directors of DS Smith to join the enlarged board as well, should the merger realise.
Mondi says the combination of the two companies is an opportunity to create a pan-European industry leader in paper-based sustainable packaging solutions, with complementary geographic footprints, well-established customer relationships, a strong balance sheet and cash flow profile, and the potential to deliver substantial benefits to respective shareholders, employees, customers and other stakeholders.
Combining Mondi and DS Smith’s strengths in the corrugated value chain, in particular, will result in more cost efficient virgin containerboard mills, a well-located converting network in Europe and more innovative solutions for customers.
Mondi and DS Smith are now collaborating to validate the quantity of synergies which they believe will arise from the merger.
UK-based regulatory body the Panel on Takeovers and Mergers has given Mondi until April 4 to announce a firm intention to make an offer to DS Smith shareholders.