By Samuel Indyk
Investing.com – Shares in packaging and paper company DS Smith PLC (LON:SMDS) jumped to the top of the FTSE 100 on Thursday after a report suggested that rival Mondi (LON:MNDI) is considering a bid for the company.
The potential deal, first reported by Bloomberg, would value DS Smith at over £5bln. However, deliberations are said to be at an early stage and there is no certainty a transaction will take place.
Both companies have declined to comment on the reports.
E-Commerce Boom
The Covid pandemic has driven a huge rise in online shopping with lockdown restrictions forcing shops to close. With the boom in e-commerce, demand for cardboard boxes from packaging companies has soared. However, these companies rely on recycled cardboard to make boxes and costs have gone up as used carboard cannot be picked up and recycled as quickly.
Mondi Results
Mondi also announced FY results on Thursday morning, where they said full year operating profit was down 29% in 2020. The company recommended boosting their dividend 5% to EUR 0.60c per share.
“We finished the year positively, with strong demand in the packaging businesses supported by the long-term growth drivers of sustainability and e-commerce,” Mondi CEO Andrew King said in a statement.
“Looking ahead, although the near-term macroeconomic outlook continues to be uncertain, we remain confident in the structural growth drivers in the packaging sectors in which we operate and the strength of our paper position.”
At 09:07GMT, shares in DS Smith were up 8% and Mondi shares were trading higher by 1.5%.