PAPER and packaging companies aren't supposed to be this exciting. An unfolding bidding battle for DS Smith, the FTSE-100 industrial group, is the least surprising M&A situation to emerge this year.

Rival London-listed Mondi's approach, pitched at 373p-a-share (although the price varies depending upon the value of its stock), always looked to have left the door open to a competing bidder.

Not wanting to be leftorphaned by industry peers getting together looks to have spurred the approach from International Paper of the US, which I revealed on Sky News last week.

That too, is an all-paper deal but the decline in International Paper's share price since its interest was made public means it's now worth scarcely more than Mondi's.

People close to the process say that both bidders would face serious competition scrutiny, even allowing for the fact that there is comparatively little geographical overlap between International Paper and DS Smith.

For shareholders in DS Smith, the appetising prospect of an ongoing bidding war solves a couple of key problems: firstly, how to replace Miles Roberts, the company's veteran chief executive, who had already signalled his intention to retire (which itself was interpreted by many as an invitation to would-be suitors).

Secondly, it has injected ballast into a flagging stock price, while also providing DS Smith with the safety of a larger global entity that should insulate it from any future unsolicited bid.

Absent the appearance of a third bidder, investors should expect these two to slug it out for a while before one of them delivers a knockout blow. DS Smith's future should be, er, neatly wrapped up well before fund managers disappear for their summer holidays.

(c) 2024 City A.M., source Newspaper