Smurfit Kappa Group, a FTSE 100 company, confirms that the boards of directors (the “Boards”) of Smurfit Kappa and WestRock Company, are discussing the key terms of a potential combination to create Smurfit WestRock, a global leader in sustainable packaging (the “Potential Combination”).
The Potential Combination would be expected to involve the creation of a new holding company, Smurfit WestRock (the “Combined Group”). Smurfit WestRock would be incorporated and domiciled in Ireland with global headquarters in Dublin, Ireland and North and South American operations headquartered in Atlanta, Georgia. The Potential Combination 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.
Strategic and Operational Rationale
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
- 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
Financial Rationale
The Boards of Smurfit Kappa and WestRock believe the Potential Combination represents a unique opportunity to create value:
- Combined last twelve months’ revenue and adjusted EBITDA as of 30 June 2023 of approximately $34 billion and $5.5 billion, respectively
- Strong cash flows for future growth and capital returns
- Targeting annual pre-tax run-rate cost synergies in excess of $400 million at the end of the first full year following completion; delivery of synergies expected to require estimated one-off cash costs of approximately $235 million to be incurred
- 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
- Disciplined capital allocation expected to deliver improved operating efficiency and increased returns
- Committed to strong investment grade credit rating
Further Details on the Potential Combination
- Following completion of the Potential Combination:
– Smurfit WestRock’s ordinary shares would be listed on the New York Stock Exchange (NYSE) and the Combined Group would seek U.S. equity index inclusion as soon as possible thereafter.
– Smurfit Kappa’s premium listing on the London Stock Exchange (LSE) is expected to be cancelled and the Combined Group is expected to list on the standard listing segment.
– Smurfit Kappa would de-list from Euronext Dublin.
– The Combined Group would be incorporated and domiciled in Ireland with global headquarters in Dublin, Ireland and North and South American operations headquartered in Atlanta, Georgia.
- 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. 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.
- There can be no certainty that the Potential Combination or any other transaction between the parties will be agreed or will occur.
- This announcement has been made with the consent of WestRock.
Further announcements may be made as and when appropriate.
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