International Paper aims to disrupt DS Smith-Mondi merger with counterbid

DS Smith (LSE: SMDS) shares surged over 7% on Wednesday following reports that International Paper, a New York-listed paper producer, intends to launch a formal counterbid to trump Mondi's agreed offer for the British packaging company.

International Paper has signalled its interest in DS Smith, potentially setting the stage for a multibillion-pound transatlantic bidding war. Mondi, another London-listed paper group, announced in February its exploration of a bid for DS Smith, leading to an agreed deal this month valuing the target at an implied 373p per share.

While the potential value of International Paper's offer remains unclear, industry bankers speculate it could exceed 400p per share, potentially reaching around 420p. This would surpass Mondi's proposal, which some shareholders and analysts argue undervalues DS Smith.

Under the Mondi deal, DS Smith shareholders would own 46% of the combined group, while Mondi's would control 54%. The companies touted the merger as creating "a pan-European industry leader."

With a market capitalisation of $14.15bn, International Paper dwarfs both DS Smith and Mondi in valuation terms. A formal bid from the American giant would pile pressure on Mondi to reassess its offer for DS Smith.

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