London-listed Smurfit Kappa will form one of the world’s largest packaging companies as it announced a multi-billion tie-up with US rival WestRock.
The Ireland-headquartered business said that the merger would create a giant with around 34 billion US dollars (£27 billion) in combined revenue last year.
The deal will help Smurfit break into the US market in a big way, the company’s boss told broadcaster CNBC.
Last week, it was reported that the combined company would be named Smurfit Westrock and would be incorporated and domiciled in Ireland with its global headquarters in Dublin. It would also trade on the New York Stock exchange – in a move widely seen as a departure from London.
“We’ve always said we had a very big gap in our portfolio because we were not involved in the United States,” chief executive Tony Smurfit said.
“We’ve been looking over many years to figure out a way to get in there in a way that would reward our shareholders over the long term.”
But Smurfit shareholders seemed less than convinced by the desirability of the deal, as the company’s shares plummeted 810 per cent to the bottom of the FTSE 100 on Tuesday afternoon.
Analysts said that investors were likely somewhat taken aback by the incentive handed to WestRock shareholders.
Investors will receive five dollars in cash plus one share in the new company, while Smurfit shareholders will simply receive one share in the new company.
But Smurfit bosses will be in control of the merged business, taking the positions of chairmanship of the board, the chief executive and chief financial officer.
Smurfit shareholders will own 50.4 per cent of Smurfit WestRock, as the new business will be called, with WestRock shareholders holding the rest.
Smurfit said: “This incredibly exciting coming together of our two great companies is a defining moment within the global packaging industry.
“Smurfit WestRock will be the ‘Go-To’ packaging partner of choice for customers, employees and shareholders.
“We will have the leading assets, a unique global footprint in both paper and corrugated, a superb consumer and speciality packaging business, significant synergies, and enhanced scale to deliver value in the short, medium and long term.”
Following the announcement, shares dropped by more than eight per cent.
Press Association – August Graham