Mondi and DS Smith Reach Agreement in Principle; PUSU Deadline Extended

March 8, 2024 - The Boards of Mondi plc and DS Smith Plc [on March 7] announced that they have reached an agreement in principle on the key financial terms of a possible all share offer by Mondi for DS Smith, pursuant to which Mondi would acquire the entire issued and to be issued share capital of DS Smith (the "Combination").

Proceeding with the Combination is conditional on, inter alia, reaching agreement on the other terms and conditions of any offer, including as to regulatory matters and the completion of mutual confirmatory due diligence to the satisfaction of Mondi and DS Smith.

Key Terms of the Combination

• Mondi shareholders would own 54 per cent. and DS Smith shareholders would own 46 per cent. of the issued and to be issued share capital of Mondi;
• Based on Mondi´s closing share price of 1,381 pence per share on 7 February 2024 (being the day prior to the commencement of the offer period), the terms of the Combination would represent an implied value of 373 pence per DS Smith share and a premium of 33 per cent. to DS Smith´s closing share price of 281 pence per share on 7 February 2024 (being the day prior to the commencement of the offer period);
• Philip Yea would be Chair, Andrew King would be the Chief Executive Officer and Mike Powell would be the Chief Financial Officer of the enlarged Mondi Group; and
• Three Non-Executive Directors of DS Smith are expected to join the enlarged Mondi Group Board.

Compelling Strategic and Financial Rationale

The Combination is an exciting opportunity to create a pan-European industry leader in paper-based sustainable packaging solutions, with complementary geographic footprints, leading customer relationships, a strong balance sheet and cash flow profile, and the potential to deliver substantial benefits to respective shareholders, customers, employees and related stakeholders.

The key benefits of the Combination:

• Increased exposure to structural growth trends in sustainable packaging;
• A highly complementary geographic footprint creating a leading player in corrugated packaging across Europe;
• Combining both Mondi´s and DS Smith´s strengths in the corrugated value chain:
• Cost efficient virgin containerboard mills;
• A market leading, well located converting network, focused on delivering innovative solutions for customers; and
• Strategically located and integrated recycled containerboard production;
• Enhanced vertical integration brings with it a more balanced paper position;
• Strengthened ability to serve global FMCG customers, leveraging proven innovation capabilities of both Mondi and DS Smith;
• Significant value creation for both Mondi and DS Smith shareholders from substantial synergies (refer to "Expected Synergies" below);
• The benefit to the Combination of Mondi being a global leader in flexible packaging;
• A strong balance sheet, supported by a solid investment grade credit rating, and strong cash flow profile providing greater resilience through the cycle and strategic flexibility for continued growth investment;
• A strong customer focus, building on the expertise of two well regarded and highly experienced management teams, driving innovation and delivering value to customers; and
• Commitment to sustainability in packaging with a complementary portfolio of products, joining forces to spearhead the shift towards a more circular and sustainable economy.

Expected Synergies

In reaching agreement in principle on the key terms, both Boards have taken into account the substantial synergies which they believe would arise from combining the two pan-European companies, and the consequent significant added value which should accrue to shareholders in the Combination.

These synergies are expected to result from vertical integration alongside highly complementary positions and expertise in containerboard, corrugated solutions and flexible packaging, as well as expected benefits from economies of scale and efficiencies across a combined supply chain and administration.

Mondi and DS Smith are currently undertaking an exercise to validate the quantity of synergies which they believe will arise from the combination and intend to publish their estimated quantity of any synergies together with the reports required under the Code in due course.

Extension of the PUSU Deadline

In accordance with Rule 2.6(a) of the Code, Mondi was required, by not later than 5.00 p.m. on 7 March 2024, either to announce a firm intention to make an offer for DS Smith in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies.

In accordance with Rule 2.6(c) of the Code, the DS Smith Board has requested that the Panel on Takeovers and Mergers (the "Panel") extends the relevant deadline, as referred to above, to enable the parties to continue their discussions regarding the Combination. In light of this request, an extension has been granted by the Panel and Mondi must, by not later than 5.00 p.m. on 4 April 2024, either announce a firm intention to make an offer for DS Smith in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer for DS Smith, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. This deadline will only be extended with the consent of the Panel in accordance with Rule 2.6(c) of the Code.

There can be no certainty that any firm offer will be made. This announcement has been made with the consent of each of Mondi and DS Smith.

The person responsible for arranging for the release of this announcement on behalf of Mondi is Jenny Hampshire and on behalf of DS Smith is Iain Simm.

DS Smith

Headquartered in London, DS Smith is a leading provider of sustainable fiber-based packaging worldwide, which is supported by recycling and papermaking operations.

Mondi

Mondi is a global leader in packaging and paper. Its business is integrated across the value chain — from managing forests and producing pulp, paper and films, to developing and manufacturing sustainable consumer and industrial packaging solutions using paper where possible, plastic when useful.

SOURCE: Mondi and DS Smith