September 20, 2023 | Industrials | Europe | Active

WestRock / Smurfitt Kappa: Deal Insight

Irish paper and packaging company, Smurfit Kappa (“Smurfit”) announced on 12-Sep-23 that it will acquire US rival WestRock as it aims to become a global leader in sustainable packaging. WestRock shareholders will receive one share in the new entity, known as ‘Smurfit WestRock’, plus $5.00 in cash for each WestRock share, valuing it at $43.51 per share based on the previous day’s closing price (11-Sep-23) and implying a 36.5% takeover premium over WestRock’s undisturbed price on 6-Sep-23, before merger talks were publicly disclosed. The merger, which will result in 49.6% and 50.4% ownership by WestRock and Smurfit shareholders, respectively, is unanimously supported by both boards. Smurfit and WestRock will publish a shareholder circular and a prospectus, respectively, as the deal requires approvals from shareholders of both merger parties at meetings expected to be held in 1H’24. The notable thresholds are 75% of shares in attendance at a Smurfit Court Meeting and EGM, and 50% of shares at a WestRock shareholder meeting. Additionally, antitrust approvals are needed from EU and US regulators, with an HSR filing due by 2-Oct-23. A burdensome clause prevents the divestment of businesses that generated more than $750m in FY’22 revenues, and there are other customary clauses covering representations, warranties, covenants, a MAC that includes carve-outs for pandemics and wars, and non-solicitation clauses with fiduciary-outs. Both companies will continue distributing dividends through completion; we expect WestRock to pay ...

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