Smurfit Kappa, Ireland’s largest paper producer, is set to acquire its U.S. rival WestRock for a whopping $11 billion, in a move that will create the world’s largest paper and packaging company. With this merger, the combined entity will be worth nearly $20 billion, cementing its position as a major player in the industry.
The news of the deal sent shockwaves through the market, causing Smurfit Kappa’s shares to drop by 10%, while WestRock’s shares rose by 7.2% in pre-market trade. Analysts expressed surprise at the premium paid by Smurfit Kappa, considering it was higher than expected. Despite this initial reaction, both companies are optimistic about the future prospects of the merged entity.
Under the terms of the agreement, WestRock stockholders will receive one share in the newly formed company, Smurfit WestRock, as well as $5 in cash for each share they hold. This represents a 28% premium on WestRock’s closing price on the previous day, prompting some skepticism regarding the premium being paid.
The merger is expected to give the combined entity a significant market share of around 20% in the corrugated packaging market in both Europe and North America. Furthermore, it is anticipated that the merger will result in cost savings of over $400 million within the first year of completion.
Once the merger is finalized, Smurfit WestRock will be domiciled in Ireland and listed on the New York Stock Exchange, with a standard listing on the London Stock Exchange. This move reflects the companies’ global ambitions and their intention to capitalize on opportunities in both the European and American markets.
The deal is expected to be completed in the second quarter of 2024, subject to regulatory approvals. Both Smurfit Kappa and WestRock are eager to proceed with the merger and are confident that it will pave the way for a successful and prosperous future for the newly formed company.
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