(Bloomberg) -- International Paper Co. agreed to buy DS Smith Plc for £5.8 billion ($7.2 billion), besting rival suitor Mondi Plc in the battle for the UK packaging company.

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The all-stock transaction would create a global leader in packaging, International Paper said in a statement Tuesday. The US company agreed to pay 0.1285 new shares of International Paper for each DS Smith share, or about 415 pence based on the share prices of both companies as of late March, when the US company went public with its interest.

The formal agreement gives International Paper the backing of DS Smith’s board, though Mondi could still return with a competing offer. Adding DS Smith will strengthen International Paper’s position in Europe and the US, outgoing Chief Executive Officer Mark Sutton said on a call with analysts and investors.

The two growing regions “represent the two largest profit pools globally for sustainable packaging,” a priority for International Paper, Sutton said.

International Paper shares fell less than 1% as of 10:21 a.m. in New York, while DS Smith declined 3.4% to 395.6 pence in London as investors anticipated an end to the takeover battle.

Shares of Mondi, which declined to comment on its interest in DS Smith, slipped 1.3%.

Based on Monday’s closing prices, the deal values DS Smith shares at 379 pence each, said Cole Hathorn, an analyst with Jefferies in London. “In our view, given competitive tensions, DS Smith shareholders were hoping for a bump in cash to the initial non-binding offers,” he wrote in a note.

Upon completion, International Paper shareholders will own about 66% of the combined company, which will seek a secondary listing in London.

Paper Deals

Combining DS Smith with International Paper would further a post-Covid consolidation trend in the paper and packaging sector. Smurfit Kappa Group Plc agreed last year to acquire WestRock Co. to create an Irish-American powerhouse.

International Paper Chief Financial Officer Tim Nicholls said the company doesn’t anticipate “major regulatory issues” and that any hurdles “would be minimal, if anything.”

The industry benefited from a surge in demand during the pandemic as consumers under lockdown ordered more goods online. The sector then had to weather a slowdown as e-commerce returned to more normal levels.



DS Smith traces its roots back to a box-making business started by the Smith family in East London in 1940. It is one of the world’s largest cardboard box makers and produces packaging for everything from cereal boxes to Amazon parcels.

Chief Executive Officer Miles Roberts plans to retire and will step down by the end of November, DS Smith said in December.

--With assistance from Gerson Freitas Jr., Lisa Pham and Eric Pfanner.

(Updates with analyst, company comments throughout.)

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