Packaging FTSE 100 company Smurfit Kappa confirmed that the boards of directors at Smurfit Kappa and packaging producer WestRock Company (WestRock) are discussing the key terms of a potential combination to create Smurfit WestRock.
The potential new holding company, Smurfit WestRock, would be incorporated and domiciled in Ireland with global headquarters in Dublin, Ireland and North and South American operations headquartered in Atlanta, Georgia. It would be effected through an Irish scheme of arrangement involving Smurfit Kappa and a merger of a subsidiary with WestRock.
It can be noted that any such merging would result in WestRock shareholders receiving consideration consisting primarily of shares of Smurfit WestRock.
Reviewing the rationale
The boards of Smurfit Kappa and WestRock believe the combination will create a key sustainable packaging partner. The companies state that by combining, they could achieve:
- Wide geographic reach across 42 countries, with significant presence across Europe and America
- Cultural alignment across both companies
- Broader opportunities for approximately 100,000 employees
- Improved operating efficiency across over 500 converting operations and 67 mills
- Shared sustainability ambitions
Smurfit Kappa and WestRock believe their merge would “create value” by:
- Seeing a combination of the last 12 months’ revenue and adjusted EBITDA as of 30th June 2023 of approximately $34 billion and $5.5 billion respectively
- Fostering strong cash flows for future growth and capital returns
- Targeting annual pre-tax run-rate cost synergies in excess of $400 million at the end of the first full year following completion; delivery of synergies expected to require estimated one-off cash costs of approximately $235 million to be incurred
- Expecting to deliver benefits to Smurfit WestRock shareholders, with transaction structure providing the opportunity for both sets of shareholders to participate meaningfully in Smurfit WestRock’s significant upside value potential
- Exhibiting disciplined capital allocation expected to deliver improved operating efficiency and increased returns
- Remaining committed to strong investment grade credit rating.
As of Tuesday 12th September, the two parties agreed to merge the companies to create Smurfit WestRock.