City snapshot: DS Smith confirms new talks over £5.7bn counter offer with New York rival

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A multibillion-pound bidding war is underway for cardboard packaging manufacturing DS Smith as the London-listed firm confirmed it had received a counter proposal from a US rival.

The group, which makes packaging for the world’s leading fmcg companies, said in a statement after markets closed last night that it was in discussions with New York-listed International Paper.

The proposal values DS Smith at £5.7bn in a deal worth 415p a share and made up of a large stock component, with the company’s shareholders potential owning 34% of the combined business should it take place.

It represents a 48% premium to DS Smith’s closing share price of 281p on 7 February before it revealed it had agreed in principle to a £10bn merger with Mondi, a packaging firm with dual listings in London and Johannesburg.

Shares in DS Smith surged 7.5% to 386.8p as markets opened this morning.

“The board acknowledges the strategic merits and potential for value creation through a combination with International Paper,” DS Smith said in yesterday’s statement after Sky News revealed talks to gatecrash the Mondi deal were underway.

“Accordingly, the board is progressing its discussions with International Paper regarding the proposal. There can be no certainty as to whether any offer will be made by International Paper or the terms of any such offer from International Paper.”

DS Smith added it was also continuing talks with Mondi about the possible all-share offer.

International Paper also confirmed the proposal and said the combination would create “a truly global leader” in sustainable packaging that was “well positioned in attractive and growing markets”.

Morning update

The Artisanal Spirits Company has posted higher than forecast revenue growth for 2023 but losses at the owner of the Scotch Malt Whisky Society widened.

Revenues increased 8% to £23.5m as it surpassed 40,000 members for Scotch Malt Whisky in the society’s 40th year and cask sales also registered significant growth.

Gross margins improved a touch to 63.8% but EBITDA losses grew to £500k and pre-tax losses widened from £2.1m in 2022 to £3.6m because of higher interest costs.

The group said achieving revenue growth despite the headwinds last year and difficulties in the Chinese market supported the board’s confidence in the business delivering “more substantial” EBITDA in 2024.

CEO Andrew Dane added: “Despite the globally challenging economic environment in 2023, the group emerged stronger, more resilient and increasingly well positioned for continued growth.”

The FTSE 100 opened down 0.2% to 7,916.93pts.

Virgin Wines continued to have a good week, rising 3.5% to 42.9p, while Sainsbury’s is up 3.1% to 270.7p so far and Associated British Foods has increased 1.7% to 2,516p.

Early fallers include Glanbia, down 3.4% to €17.20, Ocado, down 2.4% to 456.1p, Kerry Group, down 2.2% to €80.78, Bakkavor, down 2% to 104.9p, and McBride, down 1.4% to 98p.