Smurfit Kappa discuss merger with US rival WestRock

While the discussions did not disclose the financial terms of a possible deal, the Wall Street Journal, which first reported on the merger talks, said the combined entity could be worth $20 billion.

It comes a little over five years after Smurfit Kappa rejected a takeover approach from WestRock's larger domestic rival International Paper.

Operations in the US would run out of Atlanta (where WestRock is based), and the company would quit Euronext Dublin and change its listing in London to the New York Stock Exchange. This comes in the same month that CRH, the largest company in the Dublin market, is set to cancel its Irish listing as it takes on a primary listing in New York.

Smurfit Kappa said: "Discussions between the parties remain ongoing regarding the potential combination."

The leading packaging continued: "Smurfit Kappa and WestRock are engaged in a mutual due diligence process."

Furthermore, both parties stated that definitive terms and conditions will be set out in a further announcement.

If the deal follows through, it will create one of the world's biggest paper and packaging companies with market-leading positions in the US and Europe. The two firms currently employ about 110,000 people between them as independent companies across 42 countries.

The combined revenue of both firms totalled $34 billion in the last year, with an EBITDA of $5.5 billion, while at current market prices, the combined capital of the two firms would be around $19 billion.

Smurfit Kappa, led by Chief Executive Tony Smurfit, stated that the boards of both companies believe a merger represents a "unique opportunity to create value", with over $400 million of annual pre-tax cost synergies expected to be delivered by the end of the first year following completion, with the tie-up requiring one-off cash costs of $235 million.

Smurfit also said the deal would offer "complementary portfolios with unique product diversity and innovative sustainability capabilities... across renewable, recyclable and biodegradable packaging solutions".

Smurfit operates across 22 European countries and 13 countries in South, Central and North America.

One of Ireland's best-known companies, Smurfit Kappa had an upswing in sales during the Covid-19 pandemic as consumer spending rocketed, which boosted demand from retailers for Smurfit's cardboard boxes used for goods bought through online shopping. Shares doubled from just under €21 in late March 2020 to over €50 last summer.

However, the stock has struggled this year when economies reopened, and people cut back on spending. Before talks of the merger, the shares went down nine per cent in the first half of 2023, compared to a year earlier while cardboard consumption dropped six per cent, and Tony Smurfit pointed to "generally tepid demand" from consumers.

WestRock, one of the biggest packaging companies in the US, operates around 300 manufacturing facilities around the world with about 58,000 staff globally. It also has offices in Ireland in Belfast, Dublin, Limerick and Westport.

Like Smurfit, WestRock shares have also decreased by 16 per cent since January 1, giving it an overall value of $8.2 billion. However, WestRock beat Wall Street expectations for third-quarter profit and said it remained focused on streamlining its portfolio and further reducing costs.

By Kaja Traczyk

Kaja Traczyk is a reporter for the International Business Times UK and a Journalism Undergraduate with experience in news writing, reporting, and researching.