LONDON (From news reports) - Mondi PLC has increased its takeover proposal for packaging peer DS Smith PLC.

Citing people with knowledge of the matter, Mondi improved its indicative all-stock proposal "several days ago".

DS Smith still sees that bid as insufficient, however.

DS Smith shares closed 1.4% higher at 326.62 pence each in London on Friday. It has a market capitalisation of GBP4.50 billion. Mondi rose 0.2% to 1,412.00p, giving it a market value of GBP6.23 billion.

Mondi last month talked up the idea of a possible bid for packaging peer DS Smith PLC, but said an acquisition would need to fit its capital allocation policy.

Mondi explained in February it was in the early stages of considering a bid for DS Smith. It believes a tie-up would be an "exciting opportunity to create an industry leader in European paper-based sustainable packaging solutions".

The possible merger would create a company worth more than GBP10 billion.

Mondi added at the time: "Mondi's strategy is to deliver value accretive growth and, as noted above, adopts a disciplined approach to acquisitions and investment within its capital allocation framework. Any transaction with DS Smith would be assessed against this framework. Mondi remains committed to maintaining a strong and stable financial position supported by a solid investment grade credit rating and a dividend policy aimed at offering shareholders long-term dividend growth within the context of its stated cover policy."

Weybridge, Surrey-based Mondi's statement came in response to DS Smith announcing it received a highly preliminary expression of interest" from its packaging industry peer.

"The board of DS Smith understands that Mondi is considering a possible offer for DS Smith although no proposal has been received at this stage," DS Smith said at the time.

Mondi, under UK takeover rules, has a 'put up or shut up' deadline of March 7.