US Packaging Company WestRock Expected To Lock Deal With European Firm Creating $20B Entity

WestRock Co WRK is reportedly nearing a merger with Europe's Smurfit Kappa Group SMFKY, a move set to create a global paper and packaging giant valued at around $20 billion.

This potential merger comes as both companies face challenges amid weakening demand and declining prices in the containerboard market, used for making corrugated shipping boxes and industrial packaging, along with a challenging outlook for the global paper industry. 

It reflects a broader trend of fading pandemic-driven demand. After the Wall Street Journal published its report, Smurfit Kappa confirmed that it is indeed discussing with WestRock regarding a potential merger.

According to Smurfit Kappa, the talks involve establishing a new entity, "Smurfit WestRock," through a combination with a WestRock subsidiary. WestRock shareholders would receive shares in the newly formed group in this arrangement.

While no financial details about the potential merger have been disclosed, discussions between the parties continue, and mutual due diligence is underway, according to Smurfit Kappa.

Assuming the ongoing talks proceed without any setbacks, an official announcement of the deal could come as soon as next week, sources suggest.

Smurfit Kappa has outlined that the merged company would be incorporated and domiciled in Ireland, with its global headquarters in Dublin. If the merger is finalized, Smurfit WestRock's ordinary shares will be listed on the NYSE.

Additionally, Smurfit Kappa's premium listing on the London Stock Exchange and its listing on Euronext Dublin would be canceled, with the combined entity expected to list on the standard segment of the LSE, Smurfit Kappa noted.

Regarding financial performance, for the year ending June 30, the combined companies reported revenue of $34 billion and adjusted EBITDA of $5.5 billion.

Price Action: WRK shares are up 6.65% at $34.00 during the premarket session on the last check Thursday.