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Please note that DSS have extended the deadline day for Mondi offers until 5pm on 23 April, from today date. This was on this mornings first RNS.
Excellent synopsis Meconopsis! As a citizen, I'd rather they accept Mondi, but I'll probably fully sell out once things clear up. They'll be plenty of opportunities to pick up a combined company on the cheap in the future.
Thanks for your views
"...would be interested to know other peoples thoughts on this."
I fundamentally agree, and it's been muted in the press that Mondi might stretch to a 400p equivalent offer.
But, issue that Mondi have is that their stock market valuation is based on UK P/E valuation of 14 and IP is trading off a P/E of 45(!).
[Side note is that DS Smith is still only trading on a P/E of 11 compared to Mondi's 14. The reason is that whilst they have similar earnings, DS Smith has more debt and is generally viewed as having poorer capital controls.]
It means that - to offer 400p - Mondi has to "give away" half of the company. To match 415p then it becomes a reverse takeover and risks the ire of their shareholders. The Mondi deal is predicated on releasing synergies.
International paper actually don't need to pull many synergies out of the deal to get a big stock market uplift. If they buy £100m of earnings a year on a 14x basis (£1.4bn) then the US market will price that as £4.5bn (the £100m x 45 PE ratio) - that's effectively £3.1bn of shareholder value created through the acquisition even if they do nothing.
Mondi's problem is that IP can afford to throw another £1bn at the acquisition and still create lots of shareholder value.
[On a similar vein, Mondi DOES have a LITTLE wriggle room in this regard given the P/E difference, but will take a P/E hit on acquisition because of DS Smith's debt.]
The hope has to be that DS Smith's board view the Mondi merger as the better overall proposition for shareholders and employees. (Which is my view.)
Mondi/DS Smith creates a European packaging super-company with lots of synergies. Mondi has better capital management and an excess of paper board and fine paper. DS Smith is way more innovative in its sustainable packaging offering; better at recycling and has a deficit of paper board and client who haven't tended to buy fine paper (as DS Smith tends to do more recycled paper).
IP / DS Smith simply extends the IP back into Europe, which they largely exited a while ago. There really aren't that many synergies.
Which is "better" depends on whether you're a trader here or investor.
So, Mondi has room, but not much. It's best hope is that the board want the better deal than the most money. They have a duty to maximise shareholder value, not necessarily returns.
I've also just sold 80% of my position as it became my largest single stock holding. Happy with the return as I picked at COVID lows. Leaving the rest to run for now, and reinvesting proceeds.
There have been several comments on this forum along the lines that Mondi are not in a position to, or likely to raise their current all paper offer for SMDS.
On the face of it I would agree, however it did occur that they may do so.
There has already been consolidation in this sector and a merger of SMDS with International Paper would create a second global player, leaving Mondi as a relative minnow by comparison.
This opportunity to merge with SMDS is probably the last one that Mondi has (for the foreseeable) to be able to gain scale and remain in the fight so to speak.
Their initial offer was I think relatively low, it has flushed out IP, so at least Mondi now know where they need to be should they wish to improve their offer, be it a better split of equity or an addition of cash on top of the existing offer.
These are simply my thoughts, it would be interested to know other peoples thoughts on this.
Oh and if I do decide to bale, I'm thinking M&G looks attractive again..
I was just going to let it play out, but having read the II perspective (linked in another thread) and given it deeper thought, my finger's hovering over the sell button. I'm still inclined to think I can hear pencil sharpeners in the background, but ultimately is the potential upside worth the hassle?
Https://www.ii.co.uk/analysis-commentary/stockwatch-what-would-us-takeover-mean-income-share-ii531236 works for anyone not having an ii account.
Mondi has up to tomorrow to act or walk away. Kept all my shares waiting for outcome. Do not mind having IP shares
Sold my DS Smith holding this morning at 399 and topped up my phnx shares. I was only going to use it on Bt group or phnx.
I will be using SMDS sale proceeds to top up on PHNX, CARD, and possibly some ITV.
I sold the last lot on Thursday for that morale boosting 400p having let some go just before IP turned up, as I don't want to hold IP shares. I will be watching to see what MNDI's next move is and whether they trump here, as they may be worth a look if they fail here. There's been a number of bid actions recently which leads me to think that corporate buyers see the worst is over for UK equities and their lower valuations will likely rebound this year hence get in now is their call. What now for my SMDS funds - ITV, DLG and PHNX are fair candidates for a recovery this year, or something different with HTWS. Good luck here next week if you're still holding. ATB.
I wondered about Reckitt , smith snd nephew or Wpp
What are you looking at?
I also sold on Wednesday and Thursday because I didn't want IP shares, to lock in the profits, and because I don't see much more upside here.
There are plenty of other shares that look to have significant upside, so I wanted to use the funds from SMDS to move into those without delay.
My mum did the reverse! I had advised her to buy Smiths group after they sold their medical division. I only found out years later she had bought ds Smith.
You sure you didn’t just buy smiths because you like stocks with that name? 🤣
For me it was because I don’t see any more bids coming in and nearly 4 in hand is worth 415 in the bush. I don’t want IP shares. My average was 320 so it was a nice profit. I would have preferred to keep my smith shares long term but it is what it is. Funnily enough I’ve put some of the money into Smin a boring industrial conglomerate that I think will be broken up at some point
Why did everyone here sell on Thursday ?
Just goes to show how insignificant retail investors are. I too sold for 396. Did anyone buy since the IP bid?
😆 Took me a while, then the penny dropped.
Good one! 👍
Groan!!!
Well put Robbiee.
@furrycoat you won't be to do that ...........
The market is closed on mondi 😂😂😂