FTSE 100 group Smurfit Kappa (SKG) is in advanced merger talks with US-based WestRock (US:WRK) to form a “go-to” packaging giant.
If a deal is agreed, ‘Smurfit WestRock’ would be listed in New York and have a secondary listing in the UK. Smurfit Kappa’s premium listing on the London Stock Exchange would be cancelled and it would de-list from Euronext Dublin. Based on last year’s figures, the combined business would generate revenue of $34bn and adjusted Ebitda of $5.5bn.
The proposed tie-up would result in $400mn (£321mn) of pre-tax savings by the end of the first full year after completion but would require one-off cash payments of $235mn, according to Smurfit Kappa. Management stressed the joint group's “unparalleled” geographic reach, complementary portfolios and cultural alignment.
Discussions between the parties are still ongoing and there is no certainty the deal will take place. At the moment, however, Smurfit Kappa looks to be the acquirer, with WestRock shareholders due to receive shares of the combined company.
Analysts at Jefferies said the merger would accelerate Smurfit Kappa’s expansion into the Americas at an "opportunistic" time. However, they warned that “historically there's limited synergies [in] having a global footprint in the paper packaging industry”.
The bank expects there to be “limited pushback on the regulatory front, since the businesses have little overlap” given Smurfit Kappa's limited presence in North America. However, the group’s market share in Mexico would be between 27% and 28%.
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