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UPDATE: Mondi says DS Smith combination an "exciting opportunity"

8th Feb 2024 13:28

(Alliance News) - Mondi PLC on Thursday talked up the idea of a possible bid for packaging peer DS Smith PLC, but said an acquisition would need to fit its capital allocation policy.

Mondi said it is in the early stages of considering a bid for DS Smith. It believes a tie-up would be an "exciting opportunity to create an industry leader in European paper-based sustainable packaging solutions".

The possible merger would create company worth more than GBP10 billion.

Mondi added: "Mondi's strategy is to deliver value accretive growth and, as noted above, adopts a disciplined approach to acquisitions and investment within its capital allocation framework. Any transaction with DS Smith would be assessed against this framework. Mondi remains committed to maintaining a strong and stable financial position supported by a solid investment grade credit rating and a dividend policy aimed at offering shareholders long-term dividend growth within the context of its stated cover policy."

Weybridge, Surrey-based Mondi's statement came in response to DS Smith announcing it received a highly preliminary expression of interest" from its packaging industry peer.

"The board of DS Smith understands that Mondi is considering a possible offer for DS Smith although no proposal has been received at this stage," DS Smith said.

It noted the put-up-or-shut-up deadline for Mondi under UK takeover rules will be March 7.

London-based DS Smith said its announcement was made without the approval of Mondi and in response to "media speculation".

Both companies are FTSE 100 constituents.

As far back as early 2021, Bloomberg had reported that Mondi was considering a tilt at DS Smith, citing at the time "people familiar with the matter". Nothing came of it at that time.

DS Smith shares traded 10% higher at 310.15 pence each in London on Thursday afternoon. It has a GBP4.27 billion market capitalisation. Mondi was down 3.6% at 1,331.00p, giving it a market value of GBP5.85 billion. In Johannesburg, the stock was down 3.8% at ZAR317.77 each.

By Eric Cunha, Alliance News news editor

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