Smurfit Kappa Shares Plunge as It Announces Merger With WestRock
Shares of packaging group Smurfit Kappa plummeted by 10% in London after the company revealed its plans to merge with its US counterpart, WestRock. The merger will result in the formation of Smurfit WestRock, which is set to become one of the largest packaging companies globally. The newly formed company will operate through a holding company incorporated and based in Ireland. It also plans to seek a New York listing, with a standard listing on the London Stock Exchange.
Under the terms of the merger, WestRock shareholders will receive one Smurfit WestRock share and $5 in cash, equivalent to $43.51 per share. Smurfit Kappa shareholders, on the other hand, will receive one new share in the new company. Following the merger, Smurfit Kappa investors will own approximately 50.4% of the combined entity.
Smurfit Kappa, a paper-based packaging specialist, has been a beneficiary of the pandemic due to the surge in e-commerce. However, its revenue and profits slipped in the first half of 2023. CEO Tony Smurfit emphasized the company’s desire to enter the US market for a long time, stating, “We’ve always said we had a very big gap in our portfolio because we were not involved in the United States.” He believes the merger with WestRock will fill that gap and provide long-term rewards for shareholders.
The combined company will opt for a New York primary listing, as around 65% of its revenues are expected to come from the US and Latin America. Smurfit cited the larger pool of capital and higher multiples as the reasons for choosing a US listing.
The merger will position Smurfit WestRock as the largest listed global packaging firm, with a combined revenue of approximately $34 billion in the year up to July.
When questioned about whether the merger is a takeover rather than a merger, Smurfit clarified, “It’s a combination … We believe that both companies have incredible opportunities in their respective businesses. Obviously, we are paying a premium, and therefore, the positions reflect that.”
Following the announcement, Smurfit Kappa shares fell by 10% at 9:05 a.m. London time.