September 13, 2023: On Tuesday, shares of Dublin-based packaging group Smurfit Kappa dropped about 10% after it revealed it would combine with U.S. peer WestRock to create an industry juggernaut.
The parties will form Smurfit WestRock, set to be one of the largest packaging companies in the world, working through a holding company comprised and domiciled in Ireland.
The company will pursue a New York listing with a standard on the London Stock Exchange.
WestRock shareholders will accept one Smurfit WestRock share and $5 cash, equal to $43.51 per share, while Smurfit Kappa shareholders will receive one further share. WestRock shares traded 4.5% higher on Tuesday.
Smurfit Kappa investors will own about 50.4% of the new company.
FTSE 100 firm Smurfit Kappa said the deal is expected to be “high single-digit accretive” to its existing earnings per share and over 20% by the end of the first full year.
The paper-based packaging expert was a pandemic inheritor, boosted by the rise in e-commerce, and revenue and profits slipped in its 2023 first-half results.
“We’ve always said we had a big gap in our portfolio because we were not involved in the United States. We’ve been looking over many years to figure out a way to get in there in a way that would reward our shareholders over the long term,” Smurfit Kappa CEO Tony Smurfit, who will lead the combined company, told.
“We identified as an asset that we can develop with and combine to be an even better asset. So after a series of negotiations, we finally agreed to close out this deal, which I think will be fantastic for our long-term, medium, and short-term shareholders.”
Smurfit said the combined group would opt for a New York primary listing as around 65% of payments were set to be in the U.S. and Latin America because “multiples and the pool of capital over there is bigger for companies like ours.”
Smurfit asked whether the deal was a takeover rather than a merger, saying, “It’s a combination. We believe that both companies have incredible options in their respective businesses. We are paying a premium; therefore, the positions reflect that.”
The companies owned a combined income of roughly $34 billion in the year to July, making Smurfit WestRock the most prominent listed global packaging firm by that metric.
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