In major news on UK stocks, DS Smith PLC (GB:SMDS) shares soared over 7% after the company received a new takeover offer from a U.S.-based paper manufacturing company, International Paper (NYSE:IP). The new offer also raises the possibility of a potential bidding war, given that the offer price exceeds the company’s recently agreed deal with its competitor Mondi PLC (GB:MNDI).
Earlier this month, DS Smith and Mondi agreed to an all-share acquisition of DS Smith for £5.14 billion. DS Smith shares have surged by more than 20% in the past month, largely driven by Mondi’s expressed interest in acquiring the company.
DS Smith is a multinational company known for its innovative and sustainable packaging solutions and recycling services. Meanwhile, International Paper is a leading U.S.-based pulp and paper company with a significant global presence.
May the Best Company Win
According to the new offer, DS Smith shareholders would receive 0.1285 International Paper shares per DS Smith share, giving them roughly 33.8% ownership in the combined entity. On the other hand, with Mondi’s offer, DS Smith shareholders will retain 46% of the new company.
The latest offer for DS Smith at 415p per share represents a significant premium of 48% compared to the stock’s closing price on February 7, the day before Mondi unveiled its initial bid. In contrast, Mondi’s offer valued each DS Smith share at 373p, presenting a premium of 33% over the closing price on February 7th.
According to its statement, DS Smith has acknowledged the strategic benefits of merging with International Paper but emphasizes that there is uncertainty regarding the possibility of a complete offer. International Paper has until April 23 to either make a formal offer or withdraw. International Paper stated that this merger would establish a new global leader in sustainable packaging, well-positioned to capitalize on expanding markets.
DS Smith also confirmed its ongoing discussions with Mondi.
The packaging sector currently faces challenges from reduced volumes and escalating costs after a surge in parcel deliveries during the pandemic. Moreover, customers have reduced their inventory levels due to difficult market conditions. However, the companies are optimistic about generating synergies through the deal, benefiting shareholders.
What is the Price Target for DS Smith?
According to TipRanks’ consensus, SMDS stock has received a Moderate Buy rating, backed by two Buys and one Hold recommendation. The DS Smith share price forecast is 379p, which is 1.5% below the current trading levels.
