International Paper has reached an agreement to take over DS Smith in a deal worth £5.8bn, beating rival firm Mondi, whose bid valued DS Smith at just over £5.1bn, in the battle for the UK packaging company.

The new entity will focus on the North American and European markets and will generate approximately 90% of its revenue from sustainable fibre packaging. The merger is expected to deliver significant cost savings and optimisation synergies, with pre-tax cash synergies of at least US$514 million per annum by the fourth year after completion of the transaction.

DS Smith was originally founded in East London in the 1940s by cousins David G. and David S. Smith as a box manufacturing company and has since become a leading player in the packaging and paper products industry. The company listed on the London Stock Exchange in the late 1950s, expanded through strategic acquisitions and now operates in 30 countries.

As part of the share deal, International Paper has agreed to issue 0.1285 new shares for each DS Smith share. Upon completion of the transaction, DS Smith shareholders will own approximately 33.7% of the shares of the combined entity, which plans to seek a secondary listing on the London Stock Exchange.