Smith (ds) Share Discussion Threads

[jeffian] 11/2/2024 14:13

The big question, of course, is what are the Mondi shares we are being offered in return for our Smith's shares actually worth? Us older types and those with longer memories will remember the Guinness 'scandal' in which the acquirer was accused of running a share-support scheme to keep its shares artificially high to boost the value of its bid. Of course, there's no suggestion of that here but the point is that an all-share bid only has a value by reference to the acquirer's share price.

It will be interesting to see whether the Smiths board negotiate a cash element to the deal or whether another bidder is tempted to come in and offer a cash alternative.

[moorsie2] 11/2/2024 13:38

Paper packaging is a cyclical industry.

If nothing happened I would sti expect DSS to be worth 380 or so by year end. Purely based on cycles.

Mondi and the institutional shatehders know this.

Therefore my guess is a very compelling view on integration synergies and a higher multiple accordingly. So I can see 420-450 being the range. Much higher does not leave enough value for Mondi shareholders

[laurence llewelyn binliner] 11/2/2024 08:00

Interesting times here now as Mondi will be putting together an all share proposal and will have to come up with their fair value assessment, what that number equates to in Mondi shares we will find out..What is fair value..? well SMDS have been around 300 pence for the last 2 years and it has to be a premium to that or the BOD will not recommend anyone accepts the offer, somewhere near 375 pence for a 25% premium perhaps..?

[alotto] 11/2/2024 07:43

Thanks Jeffian

[jeffian] 10/2/2024 22:47

In an all-share deal you would be offered Mondi shares. The 'value' is a combination of how many Mondi shares you are offered for each Smith share and, of course, what those Mondi shares are worth. If you wanted cash, the only way would be to sell your Smith shares in the market prior to the deal at whatever the market is offering, or sell your new Mondi shares when they are received. The uncertainty over how much this will be worth to Smith shareholders is probably the reason for the muted response to the tentative offer.

[alotto] 10/2/2024 20:50

What happens to the shares in the case of a merger? Do they get paid out or converted to an equivalent value of the merged company?
Is there a cash offer in a merger?

[value king] 09/2/2024 14:15

it looks like I will be giving my long held SMDS away to Mondi then.

[moorsie2] 09/2/2024 13:22

Smurfit Kappa is proof that vertical integration brings best returns through a cycle.

So this tie up is the only game in town for these two companies.

I think they have no other option but to get into bed tpgether

[yump] 09/2/2024 12:40

And if nothing happens the dividend is nice.

[elsa7878] 09/2/2024 10:44

Know the approach is very preliminary but the fact is that SMDS is now in play.

I found the price this morning when it dipped to 306 was too good an opportunity to pass up.

If the approach comes to nothing the shareprice will probably go back to 280-285 - so an approx 7% downside to my purchase price.
If a bid comes in the upside looks to be a minimum of 15% above my purchase price.

On balance it seems to me that 315-320 should be the range until we get some clarity.

[ygor705] 09/2/2024 09:04

I've held both DS Smith and Smurfit Kappa for more than a decade. Whilst Kappa has been a very good investment DS Smith has been distinctly average. Given that their markets are broadly similar I can only ascribe the difference in share price performance to one major issue, management. I'm not expecting that to change and am expecting further decisions to be made that will not be in the best interests of DS Smith shareholders. I think that recent share price reaction suggests that others share my view. The only good news that I see is that sector consolidation is becoming more of an imperative and if Mondi doesn't absorb DS Smith then, eventually, somebody else will. Good luck to all holders.

[laurence llewelyn binliner] 09/2/2024 08:04

Interesting developments here, economies of scale are on the table, larger buying power with purchase pricing leverage, centralising of some management functions, common HR team, we will see what Mondi come in with..#Bareknee, it is called the CMA now, but in this instance I would not expect it to get referred, a merger would not impact national infrastructure/security and consumer choices in the same way as some, ie the VOD/3 deal which is now in progress and has been referred to Gov..

[grahamg8] 09/2/2024 07:23

Analyst consensus before the approach was 360p. Also take a look at the Kappa/West Rock deal. A take over or merger of near equals looks good for the business. A price in the high 300's seems achievable. Currently 308 is not enough to tempt me to sell. Bring on a bidding war.

[jeffian] 08/2/2024 22:38

All-share transactions work best when there is a disparity between the rating of the acquirer and target, so the acquirer is simply able to absorb the profits of the target but immediately get a capital benefit from them being valued at a higher multiple. I'm not sure this is the case here. Two companies of an equivalent rating can only achieve a higher valuation via synergies/cost reductions leading to higher margins. I can quite understand why the market is reserving judgement on the announcement until it all becomes clearer but, in the meantime, the good news for shareholders is that as the board of SMDS have not rejected the approach outright, the company is effectively 'in play' and other sharks may be lured to the scent of blood in the water. Let the feeding frenzy begin. Please.

[bell011] 08/2/2024 19:22

There is massive board overcapacity, certainly in UK....Smiths Jan 24 to 23 production/demand was down 9.9%. Amazon low margin factory filler output continues to decline. Quite a few box and board location closures are inevitable, whether Mondi continues it's interest, International Paper (US) whom have approached Smiths before may well return. Consolidation is necessary .

[bareknee] 08/2/2024 19:09

I'm not as familiar with Mondi as I am with DS Smith. Does anyone have a feeling for how easy, or otherwise, it would be to convince the MMC that a merger wouldn't be reducing competition too much ?

[cruelladeville] 08/2/2024 16:47

Yes 350 to 375 seems fair enough.

[jeffian] 08/2/2024 16:44

I guess the muted reaction is more to do with the variables associated with an all share deal including not only the relative weight given to the shares of each company in the combined entity but also the value of Mondi shares which are the 'currency' we will be receiving.

[elsa7878] 08/2/2024 16:36

Sadly for the Monday board they will have to deal with Robert Miles, who I gather from people who have met him, is an arrogant ..... Guess it'll be in his interest to get it sold as he is off soon and it will pump up his options and bonuses.
I think if it is sold 350-375 seems likely and explains the muted reaction thus far. Don't think it will get near £4.

[h0me] 08/2/2024 16:28

420 incoming

[jeffian] 08/2/2024 16:27

I note from the announcement put out by Mondi that what is being considered is an "all share combination" - i.e. a merger with no cash involved.

[yump] 08/2/2024 16:23

I’m sure it won’t be the last of opportunistic bids with decent businesses depressed share prices.

[cruelladeville] 08/2/2024 16:14

Not a fantastically positive reaction in the market. One disappointment after the other, DS Smith. Sell now or wait?

[kirkie001] 08/2/2024 13:21

Some snap analysis from FT Alphaville...



The timeliness of which makes me suspect they'd heard the market scuttlebutt for a while! ;)