Smurfit Kappa, a Dublin, Ireland-based company, and WestRock have announced the signing of a definitive transaction agreement that will create Smurfit WestRock.
The announcement came following the discussions of a possible combination last Thursday.
Both the Smurfit Kappa website and documents filed with the United States Securities and Exchange Commission confirm the transaction agreement.
The Reuters news agency reported today that the $11 billion deal will create the world's biggest paper and packaging company and combine Europe's biggest paper and packaging producer with the second largest company in the United States. The deal will form a company worth nearly $20 billion, Reuters reported.
“This incredibly exciting coming together of our two great companies is a defining moment within the global packaging industry,” said Tony Smurfit, CEO of Smurfit Kappa. “Smurfit WestRock will be the go-to packaging partner of choice for customers, employees and shareholders.”
Smurfit said, “We will have the leading assets, a unique global footprint in both paper and corrugated, a superb consumer and specialty packaging business, significant synergies, and enhanced scale to deliver value in the short, medium and long term.”
David Sewell, CEO of WestRock, said, “We look forward to working with Smurfit Kappa to build a leading global platform that harnesses the strength of WestRock’s consumer portfolio, presents a truly comprehensive offering of packaging solutions for customers and delivers meaningful value to our shareholders today and into the future.”
Sewell said, “Smurfit Kappa shares our deep commitment to innovation across the packaging lifecycle, and we are confident that Smurfit WestRock will continue to lead the industry forward.”
Irial Finan, chair of Smurfit Kappa, said, “We are very pleased to announce today’s combination to create Smurfit WestRock.”
Finan said, “We believe that all shareholders will benefit through ownership of a world-leading, sustainable packaging business; the combination of two of the industry’s most experienced teams with a proven track record of delivery; and, a diverse product portfolio and compelling innovation offering.”
Alan Wilson, chair of WestRock, said, “This combination will enable WestRock to advance its key growth initiatives on a global scale while providing our shareholders with the opportunity to participate meaningfully in the combined company’s significant upside value potential.”
Smurfit Kappa said subject to shareholder approvals, regulatory approvals and other customary closing conditions, the combination is expected to close in the second quarter of calendar year 2024.
Under the terms of the agreement, for each share of common stock of WestRock its common stockholders will receive one new Smurfit WestRock share and $5 in cash.
Total consideration to WestRock stockholders is equivalent to $43.51 per WestRock share, based on the closing share price of Smurfit Kappa ordinary shares on Monday — the last closing price prior to the announcement.
Smurfit Kappa shareholders will receive one new share for each ordinary share in Smurfit Kappa. Immediately following completion of the combination, Smurfit Kappa shareholders and WestRock stockholders are expected to own approximately 50.4 percent and 49.6 percent of Smurfit WestRock, respectively, based on the current number of shares outstanding of both Smurfit Kappa and WestRock.
Board recommendations
The boards of directors of both Smurfit Kappa and WestRock have unanimously approved the transaction and resolved to recommend that their respective shareholders vote in favor.
Strategic and operational rationale
The boards of Smurfit Kappa and WestRock believe the combination will create the global go-to packaging partner of choice by:
Combining two highly complementary portfolios to create a global leader in sustainable packaging
Unparalleled geographic reach across 42 countries with a significant presence across both Europe and the Americas
Complementary portfolios with unique product diversity and innovative sustainability capabilities, with breadth and depth across renewable, recyclable and biodegradable packaging solutions
Culturally aligned with strong customer focus
Broader opportunities for approximately 100,000 employees
Improved operating efficiency and increased returns across approximately 500 converting operations and 67 mills
Shared sustainability ambitions for a sustainable future
Experienced management teams with strong track records of execution and delivery to support global operations
Immediate and long-term value creation opportunity for both sets of shareholders
Financial rationale
The boards of Smurfit Kappa and WestRock believe the combination represents a unique opportunity to create value for stakeholders for the following reasons:
Combined last 12 months’ adjusted revenue and adjusted earnings before interest, taxes, depreciation and amortization as of June 30 of approximately $34 billion and $5.5 billion, respectively
The combination is expected to deliver high single digit accretion to Smurfit Kappa’s earnings per share on a pre-synergy basis and in excess of 20 percent including run-rate synergies by the end of the first full year following completion
Strong cash flows for future growth and capital returns
Targeting annual pre-tax run-rate synergies in excess of $400 million at the end of the first full year following completion; delivery of synergies expected to require one-off cash costs of approximately $235 million
Expected to deliver compelling benefits to Smurfit Kappa shareholders and WestRock stockholders, with transaction structure providing the opportunity for both sets of shareholders to participate meaningfully in Smurfit WestRock’s significant upside value potential
Disciplined capital allocation expected to deliver improved operating efficiency and increased returns
Committed to strong investment grade credit rating