International Paper Co. (NYSE:) is considering a takeover of DS Smith Plc (DITHF), entering talks that could spark a bidding war for the British packaging company.
IP shares closed down 6.5% on Tuesday.
The development comes after DS Smith had already agreed to a £5.1 billion ($6.5 billion) bid to acquire Mondi Plc (LON:) earlier this month.
DS Smith has confirmed it is in advanced talks with International Paper about a possible all-share offer following a Sky News report that the pulp and paper company is considering a £5bn or more bid for the company.
The paper and packaging industry is witnessing a wave of consolidation, highlighted by last year’s agreement between Smurfit Kappa Group Plc and WestRock (NYSE:) Co. to create a leading company in the sector.
The industry has seen a surge in demand amid the pandemic as online shopping activity has increased, although the trend has slowed as consumers return to brick-and-mortar stores.
DS Smith outlined the potential structure of the deal, saying its shareholders would receive 0.1285 International Paper shares for each DS Smith share they held. The agreement values DS Smith shares at 415p each, representing a premium of 48%.
By comparison, Mondi Plc’s offer earlier this month offered a 33% premium to DS Smith’s share price on February 7, the day before DS Smith announced its initial interest in acquiring Mondi.