The mooted deal would be expected to involve the creation of a new holding company, Smurfit WestRock, which would be incorporated and domiciled in Ireland with global headquarters in Dublin, and North and South American operations headquartered in Atlanta, Georgia.
The two companies said the potential deal would be effected through an Irish scheme of arrangement involving Smurfit Kappa and a merger of a subsidiary with WestRock. Any such combination would result in WestRock shareholders receiving consideration consisting primarily of shares of the combined group.
Outlining the strategic and operational rationale behind the possible deal, Smurfit Kappa Group stated: “The boards of Smurfit Kappa and WestRock believe the potential combination will create the global ‘Go-To’ packaging partner of choice: 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.
It continued: “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 over 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.”
The boards of the businesses said they believe the potential deal “represents a unique opportunity to create value”.
In the 12 months to 30 June 2023, the two companies had combined revenue and adjusted EBITDA of approximately $34bn (£27.2m) and $5.5bn, respectively. A combined entity would have “strong cash flows for future growth and capital returns” and would target annual pre-tax run-rate cost synergies in excess of $400m at the end of the first full year following completion.
The delivery of synergies would be expected to require estimated one-off cash costs of approximately $235m to be incurred, but the deal would be “expected to deliver compelling 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”.
Following the completion of the potential deal, Smurfit WestRock’s ordinary shares would be listed on the New York Stock Exchange (NYSE) and the combined group would seek US equity index inclusion as soon as possible thereafter.
Smurfit Kappa’s premium listing on the London Stock Exchange (LSE) would be expected to be cancelled, with the combined group expected to list on the standard listing segment, and Smurfit Kappa would de-list from Euronext Dublin.
“Discussions between the parties remain ongoing regarding the potential combination. Smurfit Kappa and WestRock are engaged in a mutual due diligence process. The definitive terms and conditions of any transaction will be set out in a further announcement,” the statement continued.
“Any potential combination would be conditional, inter alia, upon the approval by shareholders of Smurfit Kappa and WestRock and receipt of required regulatory clearances as well as other customary conditions.”
It was stressed there “can be no certainty” that the deal, or any other transaction between the two parties, would be agreed or would occur.
Smurfit Kappa operates across 36 countries globally and employs 47,000 people. WestRock employs just over 50,000 staff and works in more than 30 countries.
