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Two of the world’s largest packaging companies — WestRock of the US and Ireland’s Smurfit Kappa — are in advanced merger talks to create a global giant valued at nearly $20bn.
The combined company, to be named Smurfit WestRock, would have its global headquarters in Dublin and Americas operations based in Atlanta, Georgia, the Irish company said in a statement.
It would be listed on the New York Stock Exchange and cancel its premium London listing and its listing on the Euronext Dublin exchange, making Smurfit, Europe’s biggest packaging company, the latest major company to retreat from London in favour of the US.
The combined group would retain a secondary listing in London and is expected to be led by Tony Smurfit, chief executive of the Irish company since 2015. A spokesperson for Smurfit declined to comment further on the proposed merger.
CRH, the world’s largest building materials group and another of Ireland’s corporate giants, is switching its listing to the US from London this month.
The proposed tie-up between the packaging companies, which have a combined market capitalisation of about $18.7bn, according to Financial Times calculations based on Bloomberg data, would create the world’s “go-to packaging partner”, the statement said. The joint group would have combined revenue of about $34bn, based on sales from the last year at the two companies, it added.
Smurfit provided no financial details of the proposed merger transaction, expected to happen through an Irish scheme of arrangement, a routine legal transaction that would require court approval.
The Irish company in 2018 rejected an almost €9bn takeover offer from International Paper of the US, saying even the sweetened proposal undervalued the group.
On the proposed WestRock tie-up, it said the two companies were targeting more than $400mn in annual pre-tax savings by the end of the first year following the deal. The tie-up would require one-off costs of about $235mn, it said.
The combined packaging group would have adjusted earnings before interest, tax, depreciation and amortisation of $5.5bn.
Smurfit highlighted “strong cash flows for future growth and capital returns” and said combining the two firms’ 500 operations and 67 mills would give the merged company “unparalleled geographic reach” across 42 countries, especially in Europe and the US.
The deal would deliver “compelling benefits” to shareholders based on improved operating efficiency and increased returns, it said.
Smurfit, founded in 1934, was acquired by Jefferson Smurfit in 1938 and consolidated its position as a European leader through a merger with Kappa Packaging of the Netherlands in 1974.
Any deal would be subject to shareholder and regulatory approval. The company did not say when it expected the deal to complete. It was not immediately clear who would run the merged company.
WestRock, formed in 2015 through the merger of MeadWestvaco and RockTenn, did not immediately respond to a request for comment.
Justin Jordan, packaging analyst at Davy in London, said Smurfit and WestRock each had about 20 per cent market share of the typical brown boxes used by retailers and ecommerce groups in Europe and the US, respectively.
“There is strong commercial logic,” he said, adding that for large global consumers like Amazon, the merged company would create a “clear global leader” in packaging. The expected synergies he described as “eminently achievable” and even a “conservative estimate”.
The packaging sector saw strong demand during the pandemic when ecommerce surged but has since fallen back. Jordan expects demand will recover in 2024 with a drive to switch to paper from plastic packaging a possible spur to growth.