UK-based packaging company Mondi has announced an agreement in principle for a potential all-share offer to acquire its smaller rival DS Smith for £5.14bn ($6.57bn).  
The agreement follows after Mondi confirmed last month that it was considering a possible all-share offer for its competitor DS Smith.  

This deal would potentially create a packaging giant with a market value exceeding £10bn, Reuters reported.  

Under the agreement, Mondi shareholders would own 54% and DS Smith shareholders would own the remaining 46% of the combined entity's issued and to-be-issued share capital.  

The offer implies a value of £3.73 per DS Smith share, which is a 33% premium over the share price on 7 February 2024, the day before it disclosed an initial approach from Mondi. 

Shareholders of both companies are expected to benefit from increased exposure to growth trends in sustainable packaging and a combined geographic footprint that would establish a dominant position in the corrugated packaging sector across Europe. 

The merger aims to leverage Mondi's and DS Smith's strengths throughout the corrugated value chain.  

This includes cost-efficient virgin containerboard mills, a leading converting network, and strategically located, integrated recycled containerboard production. 

In a joint statement, the companies said: “The combination is an exciting opportunity to create a pan-European industry leader in paper-based sustainable packaging solutions, with complementary geographic footprints, leading customer relationships, a strong balance sheet and cash flow profile, and the potential to deliver substantial benefits to respective shareholders, customers, employees and related stakeholders.”  

The progression of the merger is subject to reaching an agreement on other terms and conditions, including regulatory matters and the completion of mutual confirmatory due diligence to the satisfaction of both Mondi and Smith. 

The proposed combined group would continue under its current leadership, with Mondi's Andrew King as CEO and Mike Powell as CFO.

Additionally, three non-executive directors from Smith are anticipated to join the Mondi Group board. 

According to UK acquisition regulations, Mondi had until 7 March 2024 to formalise an offer for Smith or withdraw.  

However, with the agreement in principle now in place, the deadline has been extended to 4 April this year to officially finalise the offer.