Last month, the boards of Mondi and DS Smith had reached an agreement in principle on the key financial terms of a possible all share offer by Mondi for London-headquartered DS Smith.

But following US company International Paper’s subsequent successful bid for DS Smith, Mondi said it noted the terms of the recommended all-share combination, announced on Tuesday (16 April), and has now abandoned its pursuit of DS Smith.

“Following a period of due diligence, and after carefully considering the value the combination with DS Smith would deliver to Mondi’s shareholders, the Mondi board has decided that the transaction would not be in the best interests of its shareholders. Accordingly, Mondi does not intend to make an offer for DS Smith,” Mondi stated around midday today (19 April).

“Mondi’s board remains confident that its compelling portfolio of sustainable packaging and paper products, scale and cost advantaged quality asset base, along with its pipeline of organic investments, ensure it is well positioned to deliver long-term structural growth in the markets in which it operates, delivering strong cash generation, attractive returns and sustainable value accretive growth for shareholders.”

However, it added that under Note 2 on Rule 2.8 of the Takeover Code, Mondi reserved the right to set the restrictions in Rule 2.8 of the Code aside from in the event the offer by International Paper is withdrawn or lapses, with the agreement of the board of DS Smith; if a third party announces a firm intention to make an offer for DS Smith; if DS Smith announces a Rule 9 waiver or a reverse takeover; or if there has been a material change of circumstances, as determined by the Takeover Panel.

Markets reacted quickly to the news, with DS Smith’s share price immediately dropping by over 12% to 351p just after midday today. It reached a 52-week high last Friday of 415p while its 52-week low was 260.50p.

Meanwhile, Mondi’s shares were up by over 8% just after midday, to 1,504p (52-week high: 1,563.50p; low: 1,173.59p).