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Important information: The value of investments can go down as well as up so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. This is a third-party news feed and may not reflect Fidelity’s views.

Jefferies upgrades Mondi after YTD underperformance

(Sharecast News) - Jefferies upgraded its rating on packaging firm Mondi on Friday following year-to-date underperformance. The bank said the strategic rationale for the merger with rival DS Smith is "compelling", with "substantial" synergies and value creation.

"Consolidation is good for the industry - we upgrade standalone Mondi from hold to buy post underperformance YTD, and are buyers of both DS Smith and Mondi," it said.

The bank said it prefers DS Smith "given short-term technical pressures on Mondi".

Jefferies said its pro-forma estimates see approximately €3.3bn EBITDA and more than €2 earnings per share by year three post full synergy delivery.

The bank has a price target of 1,650p on Mondi.

It emerged last week that Mondi had agreed to buy smaller rival DS Smith for £5.1bn. The agreement in principle has an implied value of 373p per DS Smith share.

Under the terms of the deal, Mondi shareholders would own 54% of the combined entity, while DS Smith shareholders would own the rest.

At 0915 GMT, Mondi shares were up 1.1% at 1,325.50p,

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Important information: This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Past performance is not a reliable indicator of future returns.

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