IRELAND – Corrugated packaging company, Smurfit Kappa is in discussions to merge with U.S. rival WestRock, in a tie-up of two of the world’s largest paper and packaging producers.
The combined entity would be named Smurfit WestRock and domiciled in Ireland with its global headquarters in Dublin, Smurfit said in a statement.
It did not disclose the possible financial terms of a deal and said definitive terms would be set out in a further announcement. Any deal would be subject to shareholder approval, due diligence and regulatory approval, it said.
The Irish packaging group said the potential merger could create a global packaging giant, adding that both companies share “complementary portfolios” across their products and capabilities.
The Group also noted its “unparalleled geographic reach” across 42 countries with a “significant presence” across both Europe and the Americas.
Combined, revenue in the last twelve months reflected around US$34 billion (€31.2bn), while adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were around US$5.5 billion (€5.13bn).
The group also added that both companies have “strong cash flows for future growth and capital returns.”
In addition, Smurfit Kappa said that the combined group could have pre-tax run-rate cost synergies of over US$400 million (€373.2m) at the end of the first full year after the deal is completed.
The group also anticipates one-off cast costs of approximately US$235 million (€219.3) to be incurred ahead of the delivery of these synergies.
Smurfit Kappa added that the merger would also create a company with around 100,000 employees, up significantly from the group’s current employee base of more than 47,000.
If the potential merger was completed, Smurfit WestRock’s ordinary shares would be listed on the New York Stock Exchange, with the Irish packaging group de-listing from Euronext Dublin. It would also seek US equity index inclusion as soon as possible.
Smurfit Kappa’s premium listing on the London Stock Exchange is also expected to be canceled and the combined group is expected to list on the standard listing segment.
Long one of Ireland’s best-known companies, Smurfit Kappa surged during the pandemic as consumer spending rocketed. That boosted demand from retailers for Smurfit’s cardboard boxes, as online shopping jumped.
Its shares more than doubled from just under €21 in late March 2020 to more than €50 last summer. Yet the stock has struggled this year as people reined in their spending.
The shares were down about a fifth so far in 2023 before news of the talks emerged, and Mr. Smurfit pointed to “generally tepid demand” from consumers when announcing the firm’s half-year results last month.
Sales fell 9 percent in the first six months of 2023 compared with a year earlier, while cardboard consumption dropped 6 percent.
For its part, WestRock is one of the biggest packaging companies in the US, with about 58,000 staff globally, according to its website.
Listed in New York, it operates about 300 manufacturing facilities around the world. It also has five offices on the island of Ireland, in Belfast, Dublin, Limerick and Westport.
Like Smurfit, WestRock shares have slumped this year and are down about 16 percent since January 1st, giving it an overall value of US$8.2 billion.
Citigroup is acting as corporate adviser to Smurfit Kappa on the talks, while WestRock has retained investment banks Evercore and Lazard, sources said.
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