Smurfit Kappa is in discussions to merge with US rival WestRock, the company said today, in a tie-up of two of the world's largest paper and packaging producers.
The combined entity would be named Smurfit WestRock and domiciled in Ireland with its global headquarters in Dublin, Smurfit said in a statement.
If the deal goes ahead, Smurfit Kappa said it would delist from Euronext Dublin and the merged entity would be listed on the New York Stock Exchange.
Smurfit Kappa did not disclose the possible financial terms of a deal and said definitive terms would be set out in a further announcement.
Any deal would be subject to shareholder approval, due diligence and regulatory approval, it said.
WestRock shareholders would receive shares in the combined group, Smurfit Kappa said. Smurfit Kappa's shares in Dublin were lower this afternoon.
US-listed shares of WestRock rose 6.6% in trading before the bell on Wall Street.
Smurfit, which operates in 22 European countries and 13 in South, Central and North America, is Europe's largest paper and packaging producer. WestRock is the second largest packaging company in the US.
At current market prices, the combined market capital of the two firms would be around $19 billion. They had combined revenue of $34 billion in the 12 months to the end of June.
Research analysts at Credit Suisse said the proposed combination had significant strategic and operational merits and strengthens the company's Americas presence, especially in faster-growing Central America.
The merger would be "a good cultural fit" with a strong focus on an innovation-driven expansion of the group's sustainable packaging business, they said in a research note.
The combined entity, which would have around 100,000 employees, could log pre-tax cost savings of more than $400m on an annual run-rate basis at the end of the first year following the completion of the deal, said Smurfit.
The tie-up would require one-off cash costs of approximately $235m, it added.
The deal would offer "complementary portfolios with unique product diversity and innovative sustainability capabilities, with breadth and depth across renewable, recyclable and biodegradable packaging solutions", the Smurfit statement said.
Smurfit Kappa has benefited from a boom in demand for packaging goods and e-commerce during Covid-19 lockdowns, but suffered a setback when economies reopened and producers started cutting back packaging stocks.
Last month it reported a fall in first-half core profit as it struggled to offset a year-on-year decline in volumes.
WestRock beat Wall Street expectations for third-quarter profit and said it remained focused on streamlining its portfolio and further reducing costs.
The merger, which was first reported by The Wall Street Journal, would be effected though an Irish scheme of arrangement involving Smurfit Kappa and a merger of a subsidiary with WestRock, Smurfit said.
Smurfit would de-list from Euronext Dublin and cancel its premium listing on the London Stock Exchange under the deal, the statement said.
Its North and South American operations would be headquartered in Atlanta, Georgia, the company added.
