Following the announcement of a possible combination, the Boards of Smurfit Kappa and WestRock announce the signing of a definitive transaction agreement to create Smurfit WestRock, a global leader in sustainable packaging.
The Boards of Smurfit Kappa and WestRock see compelling strategic, commercial and financial rationale for combining Smurfit Kappa and WestRock’s highly complementary paper-based packaging companies to create a global leader in sustainable packaging. The Combination will enhance Smurfit Kappa and WestRock’s existing offerings by creating the global “Go-To” packaging partner of choice and bringing together:
- Smurfit Kappa’s industry-leading operational execution and innovation as a European leader in corrugated and containerboard as well as its large-scale pan-regional Americas presence that delivers best-in-class performance and returns; and
- WestRock’s leadership in the United States as well as its strong footprint in Brazil and Mexico, across corrugated and consumer packaging delivering a broad portfolio of packaging solutions serving diverse, growing end-markets.
Smurfit WestRock will have unparalleled geographic and product diversity with a culturally aligned customer focus and enhanced capabilities to serve customers globally. Together, Smurfit Kappa and WestRock generated combined last twelve months’ adjusted annual revenue of approximately $34 billion as of 30 June 2023, which would make Smurfit WestRock the largest listed global packaging partner by revenue.
The Transaction will involve the creation of a new holding company for the combined Smurfit WestRock. Smurfit WestRock will be incorporated and domiciled in Ireland with global headquarters in Dublin, Ireland and its North and South American operations will be headquartered in Atlanta, Georgia.
Commenting on the Combination, Tony Smurfit, CEO of Smurfit Kappa, said: “This incredibly exciting coming together of our two great companies is a defining moment within the global packaging industry. Smurfit WestRock will be the ‘Go-To’ packaging partner of choice for customers, employees and shareholders. We will have the leading assets, a unique global footprint in both paper and corrugated, a superb consumer and specialty packaging business, significant synergies, and enhanced scale to deliver value in the short, medium and long term.”
Commenting on the Combination, David Sewell, CEO of WestRock, said: “We look forward to working with Smurfit Kappa to build a leading global platform that harnesses the strength of WestRock’s consumer portfolio, presents a truly comprehensive offering of packaging solutions for customers and delivers meaningful value to our shareholders today and into the future. Smurfit Kappa shares our deep commitment to innovation across the packaging lifecycle, and we are confident that Smurfit WestRock will continue to lead the industry forward. I’m grateful to WestRock’s team members, whose hard work has made this combination possible, and excited for the many opportunities that will arise from becoming part of the partner of choice in our industry.”
Commenting on the Combination, Irial Finan, Chair of Smurfit Kappa, said: “We are very pleased to announce today’s combination to create Smurfit WestRock. We believe that all shareholders will benefit through ownership of a world-leading, sustainable packaging business; the combination of two of the industry’s most experienced teams with a proven track record of delivery; and, a diverse product portfolio and compelling innovation offering.”
Commenting on the Combination, Alan Wilson, Chair of WestRock, said: “This combination will enable WestRock to advance its key growth initiatives on a global scale while providing our shareholders with the opportunity to participate meaningfully in the combined company’s significant upside value potential.”
Strategic and Operational Rationale
The Boards of Smurfit Kappa and WestRock believe the 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 approximately 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
The Boards of Smurfit Kappa and WestRock believe the Combination represents a unique opportunity to create value for stakeholders:
- Combined last twelve months’ adjusted revenue and adjusted EBITDA as of 30 June 2023 of approximately $34 billion and $5.5 billion, respectively
- Combining Smurfit Kappa and WestRock on equivalent enterprise value to EBITDA multiples
The Combination is expected to deliver high single digit accretion to Smurfit Kappa’s earnings per share on a pre-synergy basis and in excess of 20% including run-rate synergies by the end of the first full year following completion
- Strong cash flows for future growth and capital returns
- Targeting annual pre-tax run-rate synergies in excess of $400 million at the end of the first full year following completion; delivery of synergies expected to require one-off cash costs of approximately $235 million
- Expected to deliver compelling benefits to Smurfit Kappa shareholders and WestRock stockholders, 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
Governance and Management
Smurfit WestRock will bring together the best of both companies’ management teams to create a world class leadership team. Smurfit WestRock will be led by Irial Finan as Chair, Tony Smurfit as CEO, with Ken Bowles as CFO. The Board of Smurfit WestRock will consist of 6 WestRock Directors and 8 Smurfit Kappa Directors, including Irial Finan, Tony Smurfit and Ken Bowles.