Global packaging and paper group Mondi said Friday it will not move forward with a bid to acquire DS Smith.
The announcement comes days after the boards of International Paper and DS Smith recommended a combination of their two companies in an all-stock deal, then valued at $7.2 billion. During an International Paper call with investors Tuesday, analysts asked about whether there could still be a counteroffer submitted, in light of Mondi’s April 23 deadline for a formal offer.
“Following a period of due diligence, and after carefully considering the value the combination with DS Smith would deliver to Mondi's shareholders, the Mondi Board has decided that the transaction would not be in the best interests of its shareholders. Accordingly, Mondi does not intend to make an offer for DS Smith,” the company said in a statement it released Friday morning.
Mondi publicly signaled its interest in acquiring British company DS Smith in early February. An offer appeared to be progressing, then International Paper entered the fray with its own proposal for DS Smith on March 26. A filing with the U.S. Securities and Exchange Commission this week shows that IP put in place a confidentiality agreement with DS Smith that took effect Feb. 27.
Prior to Mondi’s Friday announcement, Bloomberg noted on Thursday that a dip in International Paper’s stock price had put the value of its all-stock offer below that of Mondi’s initial informal proposal. That’s not unusual in this type of transaction, analysts say.
“Anything that’s an all-stock offer is going to have that fluctuation because stock values fluctuate,” said Jennifer Christ, manager of consumer and commercial goods research at The Freedonia Group. “You’ve got currency changes there, too. I’m sure that they’ve built that into their consideration because it happens all the time. I think it just looks a little messier right now because you have two potential bids in play and the fluctuation is visible.”
International Paper said this week it expects an acquisition of DS Smith could be completed by the fourth quarter pending shareholder and regulatory approvals.
Senior Reporter Katie Pyzyk contributed additional reporting to this story.
