DS Smith receives takeover approach from Mondi, shares surge

Packaging company DS Smith surged on Thursday after confirming it has received "a highly preliminary expression of interest" from rival Mondi.

"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," it said in a brief statement.

DS Smith said there can be no certainty as to whether any proposal will be made or the terms of any such proposal and that a further announcement will be made if and when appropriate.

At 1035 GMT, DS Smith shares were 11.7% higher at 314.10p.

Under takeover rules, Mondi now has until 1700 GMT on 7 March to either announce a firm intention to make an offer or walk away.

In a separate statement, Mondi confirmed it is in the early stages of considering a possible all share combination with DS Smith.

"Mondi routinely considers various options within its disciplined capital allocation framework aimed at accelerating its growth in the structurally growing packaging sectors in which it operates," it said.

Mondi said a combination with DS Smith would represent "an exciting opportunity to create an industry leader in European paper-based sustainable packaging solutions" that is well positioned to benefit from structural growth trends in sustainable packaging.

The combined entity would benefit "from enhanced vertical integration, bringing with it a balanced paper position, greater earnings resilience through the cycle and enhanced security of paper supply, for the benefit of both shareholders and customers".

It would also benefit from "substantial synergies as a result of vertical integration alongside highly complementary positions and expertise in containerboard, corrugated solutions and flexible packaging, in addition to expected benefits from economies of scale and efficiencies across a combined supply chain and administration".