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Packaging And Design

'Bidding War' For DS Smith A Sign Of Changing Times For UK Firms

By Steve Wynne-Jones
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'Bidding War' For DS Smith A Sign Of Changing Times For UK Firms

The current "bidding war" for packaging firm DS Smith is an indication that UK opportunities are starting to catch the eye of foreign investors, AJ Bell investment director Russ Mould has noted.

Mould was commenting after DS Smith revealed that it was in discussions with International Paper over a potential takeover deal, following on from recent interest from rival Mondi.

'A Truly Global Leader'

In a statement, DS Smith said that the proposed deal from International Paper would 'create a truly global leader in sustainable packaging solutions that is well positioned in attractive and growing markets', and 'significantly strengthen the combined corrugated packaging business in Europe'.

According to Mould, “Countless stocks have traded on relatively low valuations for years as the UK market has been unloved by foreign investors. There have been plenty of chances for companies to take advantage of this valuation opportunity by launching takeover bids, but increasingly we’re seeing interested parties only throw their hat in the ring when someone else makes the first move.

“DS Smith is the latest in a growing line of companies to find itself at the centre of a bidding war. Having already been courted by Mondi, it has now received an expression of interest from International Paper. The latter proposal is structured as an all-share offer which means UK investors will have to be comfortable owning US-listed stock to support the deal."

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Best Value For Shareholders

DS Smith noted in its statement that there 'can be no certainty' that any offer will be made by International Paper for its business, and, "ultimately, the board will choose the offer that delivers the best value for shareholders," adds Mould.

"But what it shows is that investors should not rush to accept the first bid that comes along if one of their stocks becomes a takeover target. They just might find someone else wants to make a higher bid, so load up on the popcorn and enjoy the action.”

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