- Smurfit Kappa also in takeover talks
- Better outlook for cardboard boxes
FTSE 100 group Mondi (MNDI) is considering whether to buy fellow packaging giant DS Smith (SMDS), to create “an industry leader” in Europe.
Mondi said an all-share combination would result in greater earnings resilience and enhanced security of paper supply, as well as “substantial synergies”. Mondi currently makes more paper than it requires and sells the excess on the open market, meaning it is very exposed to paper prices. In contrast, DS Smith is net short. The latter also focuses exclusively on paper-based packaging, while Mondi makes plastic and paper products.
Deliberations are “in the early stages” and DS Smith has yet to receive a proposal, but its share price jumped by 16 per cent in response to Mondi’s “highly preliminary expression of interest”.
It is all change in the packaging industry. In September, Smurfit Kappa (SKG) announced an agreement to merge with US packaging giant WestRock to form Smurfit WestRock. The new group is due to be listed in New York and have a secondary listing in the UK.
The deal has not been finalised, but Smurfit Kappa said this week that it was “increasingly excited about the potential this combination presents”.
The outlook for packaging companies seems to be improving after a difficult 12 months. Smurfit Kappa reported sequential increases in demand throughout 2023 and volumes in its US business have now returned to growth.
After a period of uncertainty, Mondi has also managed to dispose of its Russian assets and intends to return the €775mn (£662mn) to shareholders via special dividend of €1.60 per share.
