Dive Brief:
- WestRock has the green light from shareholders to be acquired by Smurfit Kappa, after a vote Thursday to approve the deal. The announced approval is based on the preliminary vote count, according to a WestRock news release, and the final tally has yet to be disclosed.
- Smurfit Kappa held its own shareholder vote on Thursday as well. The company reported that it received approval from investors holding more than 75% of stock by value — which is necessary to proceed — with approximately 99% voting in favor.
- In addition to deciding on the overall business combination, shareholders were asked to vote on a compensation proposal for Smurfit WestRock executives and a proposal to create Smurfit WestRock “distributable reserves.” A proxy statement says those reserves are “required under Irish law in order for Smurfit WestRock to pay dividends and make other types of distributions and to repurchase or redeem shares in the future.”
Dive Insight:
If this deal reaches completion, WestRock common stockholders will receive one new Smurfit WestRock share and $5 in cash for each share of WestRock common stock. Smurfit Kappa shareholders would have 50.4% ownership of the new company under the deal, which was valued last year at more than $11 billion, per a Bloomberg estimate.
Initially, the two companies expected their deal to close this quarter. But in its February earnings release, WestRock indicated a slight delay, with July listed as the anticipated closing timeframe.
Documents released last week show that the transaction is expected to be finalized on July 5. Trading of Smurfit Kappa shares in Ireland will cease on July 2, and trading of Smurfit WestRock shares on the New York Stock Exchange will begin on July 8.
Smurfit Kappa and WestRock surprised many in the packaging industry with the September 2023 announcement that they were in advanced talks to merge. Days later, the companies announced they had reached an agreement.
Initial discussions about a combination go back to June 2019 when Citigroup Global Markets Limited, Smurfit Kappa’s financial advisor, approached WestRock with an outline of a preliminary proposal, according to securities filings. Then, in January 2022, WestRock CEO David Sewell was also approached by an undisclosed private equity firm about a possible transaction.
In January 2023, WestRock and Smurfit Kappa began discussing a potential combination in earnest. Smurfit Kappa made an informal offer in February 2023, and WestRock executives then re-examined discussions they had had with “another paper and packaging manufacturing company” since 2016 about a possible transaction. And in March 2023, the unnamed private equity firm also re-emerged with an informal offer to buy WestRock. But WestRock decided in April to forgo further discussions with anyone else and to instead pursue an arrangement with Smurfit Kappa, with negotiations occurring throughout the summer.
After the public announcement about the proposed combination in September 2023, analysts anticipated WestRock and Smurfit Kappa would experience smooth sailing through the regulatory process considering their respective footprints had little overlap. Analysts generally anticipated shareholder approval. For example, BofA Securities analysts said in September that the deal seemed positive overall and “collective equity could yield 30%+ upside for shareholders over time.”
Yet, this month WestRock issued an addendum to its initial proxy statement released in April to clarify what some shareholders had described as omissions that they said could be misleading. That SEC document also noted that three lawsuits had been filed in May by shareholders alleging omissions and misleading statements. The company said the claims “are without any merit and that no supplemental disclosure is required under applicable laws,” but it issued the update anyway to minimize the risk of delaying the deal closing.
