U.S.-based WestRock (NYSE:WRK) and Europe’s Smurfit Kappa (GB:SKG) (SMFKY) have announced a merger agreement to create a major packaging company worth about $20 billion. Last week, the two companies had confirmed discussions on the matter.
The combined revenue of the two companies for the fiscal year ending in July amounts to roughly $34 billion. This would position the combined company, to be called Smurfit WestRock, as the largest packaging company globally based on revenue. In addition, the company will have a presence across 42 countries, with over 60% of revenues generated in the U.S.
Moreover, Smurfit Kappa anticipates the deal to be “high single digit accretive” to its earnings per share on a pre-synergy basis.
Key Merger Details
Upon the completion of the merger, which is anticipated in the second quarter of 2024, the combined entity’s global headquarters will be situated in Dublin, Ireland, with American operations based in Atlanta, Georgia. The ordinary shares of Smurfit WestRock will be listed on the NYSE and the London Stock Exchange.
As per the agreed terms, WestRock shareholders will be granted one Smurfit WestRock share and $5 in cash, which equates to about $43.51 per share. Meanwhile, Smurfit Kappa shareholders will receive one new share of the new entity. Following the deal’s completion, Smurfit Kappa shareholders and WestRock stockholders are expected to own about 50.4% and 49.6%, respectively, of Smurfit WestRock.
Regarding leadership roles, Tony Smurfit, Smurfit Kappa’s CEO, will serve as the CEO of the combined entity. Additionally, Irial Finan, Smurfit’s Chairman, will assume the role of the new company’s Chairman. Smurfit WestRock’s board of directors will comprise six WestRock members and eight Smurfit members.
Is Smurfit Kappa a Good Buy?
SMFKY stock has gained about 5% so far in 2023. However, the U.K.-listed shares of the company fell following the news of the merger. The company boasts a strong free cash flow position, which supports its capital deployment moves and helps enhance shareholders’ value. While the latest development is expected to boost its performance, the deal is still subject to necessary regulatory approvals.