Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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Sad how the first thing they will do is to lay off 400 people. Sad that another stock is taken off from the LSE.
Unfortunately the shareholders have been short sighted and selfish in a way.
Quite possibly, deep - The Smith board originally agreed the Mondi deal, now they've switched in favour of the IP approach - the Mondi merger seems the better tie - up for DSS, according to most observers, bringing into being a European major grouping being a cleaner arrangement for existing shareholders, too.
Mondi has pondered this amalgamation for quite some time and now they've made their move for it, will they let it slip through their fingers for a modest improvement in their terms?
We'll soon know - sasa.
IP it is then.
Mondi still have till 23rd April to up their bid . It might not be all over yet !
Personally at this price I’d rather be out and put the money in other undervalued ftse, than deal with this nice problem and potential us tax
It's a high quality problem to have. You will be getting a good bump in asset value compared to previous valuations. What you do with it from there is up to you. Despite withholding tax and lower dividends, my US shares have performed far far better than my UK. ones.
If the IP price is currently much more favourably valued than Smiths is now, I see that as a big risk. I quite like owning companies that I can buy at low valuations where the risks appear low. Once I own IP shares Smiths will represent only a small proportion of it and I suddenly own something whose price could be over inflated. If earnings disappoint, the price could fall back significantly wiping out any theoretical gain in value. The Mondi deal would be the only one where I would retain the shares. Of course IP may go on to greater things and it could be a great deal but i would rather buy a US fund than an individual companies shares.
Martin, the secondary London listing is "Seek" or "Considering" and not a done deal, nor to be fair to International Paper would I expect more from them, at this stage. The problem is the dividends, apart from those in a SIPP, should they fail to list. Even filling out a W-8BEN would only reduce the US tax from 30 to 15%. As all of my investment is ring fenced in an ISA I don't want any tax deduction.
With IP we will get the gains of a US share rating as Meconopsis points out and with IP saying they will have a secondary listing in London it makes me slightly more favourably inclined to their offer, anyone else have that thought or am I missing something?
Wish I’d held 🤣 I sold at 400
Finger getting twitchy...
From todays price movement the market obviously expects IP to come back, will the Board entertain them, will they go hostile?
Interesting few weeks.
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.