Mondi agrees £5bn deal for DS Smith in bid to create packaging heavyweight

MONDI has agreed to buy rival DS Smith for £5.1bn (US$6.5bn) in a deal which will create one of the world’s largest paper and packaging companies.

The UK-based firms announced in February that discussions were underway and have now revealed the provisional terms of the deal which would see Mondi shareholders own 54% of the firm and DS Smith the remaining 46%.

DS Smith employs 30,000 people in more than 30 countries. It produces cardboard packaging used by consumer goods firms including Amazon and food and drinks manufacturers. Once used, it collects the cardboard and transports it to its paper mills where they are pulped back into paper to make fresh boxes. Mondi employs around 22,000 people in more than 30 countries, and as well as cardboard packaging also produces printing paper and flexible plastic packaging. Both also manage their own forests.

The companies say the tie-up will lead to substantial synergies. If a deal is finalised, cuts are likely to be made throughout their combined supply chains and administration. The pair say they are currently working out the value of these potential savings. Under the terms of the provisional deal, which would create a firm worth more than £10bn, Mondi has until the 4 April to announce a firm intention to buy DS Smith.

It will be the largest merger in the sector since Ireland’s Smurfit Kappa agreed a deal with US firm Westrock in September. Expected to close in July, that deal will form a firm worth almost US$20bn.

The packaging sector experienced strong growth in demand during the pandemic due to people buying more products online but this has since declined.