Proactive Investors - Mondi PLC (LON:MNDI), the packaging company, has agreed in principle to purchase rival DS Smith PLC (LON:SMDS) for £5.14 billion, in turn lifting the group’s market value to around £10 billion.
The offer values DS Smith at around 373p per share, despite shares in the group trading at 350p on Friday.
It represents a 33% premium over DS Smith's share price as of February 7, the day before the announcement of the preliminary bid.
"The combination is an exciting opportunity to create a pan-European industry leader in paper-based sustainable packaging solutions," the companies said in a joint statement.
Consolidation comes as paper packaging firms continue to struggle with reduced volumes and weaker prices, as the industry continues to lag behind its heights from the pandemic-induced e-commerce boom.
Last month, Mondi said the deal would be an “exciting opportunity to create an industry leader in European paper-based sustainable packaging solutions".
Mondi shareholders are set to own 54% of the new group, with the leadership being maintained with CEO Andrew King and finance chief Mike Powell keeping their roles.
Last year, fellow industry rival Smurfit Kappa (LON:SKG) revealed it was merging with US company WestRock to create a US$34 billion-revenue packaging giant.
Mondi shares slipped 2% on the news.