Smurfit Kappa in Talks to Merge with U.S. Rival WestRock, Creating Global Paper and Packaging Giant
DUBLIN, Sept 7 – Smurfit Kappa, Europe’s largest paper and packaging producer, is in discussions to merge with U.S. rival WestRock in a move that would create one of the largest global entities in the industry, the Irish firm announced on Thursday.
The combined company, to be named Smurfit WestRock, would be domiciled in Ireland with its global headquarters in Dublin. It would also be listed on the New York Stock Exchange. While the terms of the potential deal were not disclosed, Smurfit Kappa stated that further details would be provided in an upcoming announcement, subject to shareholder and regulatory approval, as well as due diligence.
Under the proposed merger, WestRock shareholders would receive shares in the combined group. The news saw U.S.-listed shares of WestRock surge 6.6% in pre-market trading, while Smurfit Kappa’s Irish-listed shares declined 2.16% at 0900 GMT.
With operations in 22 European countries and 13 in South, Central, and North America, Smurfit Kappa is a major player in the paper and packaging sector. On the other hand, WestRock is the second-largest packaging company in the U.S.
Based on current market prices, the consolidation of the two firms would result in a combined market capitalization of approximately $19 billion. In the 12 months ending June, they reported a combined revenue of $34 billion.
According to research analysts at Credit Suisse, the proposed merger offers significant strategic and operational benefits, particularly in strengthening the company’s presence in the Americas, especially in faster-growing markets like Central America. They also highlighted the cultural fit between the two firms and the potential to expand their sustainable packaging business.
The combined entity is expected to have around 100,000 employees and could achieve pre-tax cost savings of more than $400 million annually within the first year of completing the deal, according to Smurfit Kappa. However, it would require one-off cash costs of approximately $235 million.
The merger is seen as an opportunity to combine portfolios and enhance product diversity while emphasizing innovation and sustainability in packaging solutions. In addition, it would create a company with extensive expertise in renewable, recyclable, and biodegradable packaging.
This potential deal comes at a crucial time for Smurfit Kappa, which has enjoyed significant demand for packaging goods and e-commerce during the COVID-19 lockdowns. However, the company faced challenges when economies reopened, and producers began reducing packaging stocks. In its recent interim results, Smurfit Kappa reported a decline in first-half core profit as it struggled to offset a year-on-year decline in volumes.
WestRock, on the other hand, surpassed Wall Street expectations for third-quarter profit, focusing on streamlining its portfolio and reducing costs.
The merger would be carried out through an Irish scheme of arrangement involving Smurfit Kappa and a subsidiary merger with WestRock. As part of the deal, Smurfit Kappa would delist from Euronext Dublin and cancel its premium listing on the London Stock Exchange. The North and South American operations would be headquartered in Atlanta, Georgia.
The potential merger between Smurfit Kappa and WestRock signals a significant consolidation in the global paper and packaging industry. If approved, the combined entity would have substantial market reach and capabilities in meeting the evolving demands for sustainable packaging solutions.
Reporting by Kanjyik Ghosh and Pratyush Thakur in Bengaluru and Conor Humphries in Dublin, Additional reporting by Savyata Mishra; Editing by Shailesh Kuber, Dhanya Ann Thoppil, and Jan Harvey