US-based International Paper has made an all-equity proposal for the acquisition of the entire issued share capital of British packaging company DS Smith, setting up a possible bidding war. 

As per the terms of the potential transaction, Smith’s shareholders will be eligible to receive 0.1285 shares in International Paper in place of each share they own in Smith.  

The proposed all-equity transaction would see Smith’s shareholders owning approximately 33.8% of the combined entity. 

Reuters reported that International Paper has valued Smith at $7.22bn. 

The latest announcement follows Mondi‘s proposition earlier this month, where it agreed in principle to an all-share offer to acquire Smith for £5.1bn ($6.5bn).  

Mondi’s offer implied a value of £3.73 per Smith share, with Mondi shareholders set to own 54% of the enlarged group. 

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International Paper’s closing share price on 25 March 2024, which was the last trading day for the business, was $40.85 while the offer represents a value of £4.15 per share.  

It also represents a 48% premium over Smith’s share price on 7 February 2024, the day before the offer period began, when shares were valued at £2.81 each. 

While the acquisition is not guaranteed, International Paper’s board continues to evaluate mergers and acquisitions with a ‘disciplined approach’.  

The US-based company believes that taking over Smith would align with its strategy to bolster its corrugated packaging business in Europe and deliver substantial value to shareholders of both companies. 

The deal also promises to integrate the mill and box networks of both companies across Europe and the US, balance paper positions, and optimise supply chains.