Atlanta, Georgia-based WestRock Company (NYSE:WRK) stock is climbing over 5% and trending on social media. The rally comes after WestRock’s European competitor, Smurfit Kappa (OTCMKTS:SMFKY), announced that it is going forward with its $11.2 billion merger with WestRock. SMFKY stock is down about 8% this morning.
The deal will create one of the largest packaging companies in the world.
WRK Stock: More About the Transaction
The merged company will be called Smurfit WestRock and will be based in Ireland.
As a result of the deal, WRK stock owners will get one share of Smurfit WestRock stock and $5 of cash for each share of WRK that they own. The price is 28% above the level at which WRK stock closed yesterday.
Smurfit Kappa shareholders will receive one share of the merged company, and its shareholders will control about 50.4% of the new firm.
Smurfit Kappa reported that it had made the deal in order to enter the U.S. market. Both American and European regulators will likely review the transaction. However, both companies’ boards of directors have unanimously signed off on the deal.
The Future of the Combined Company
The new company will generate annual revenues of about $34 billion and adjusted EBITDA of $5.5 billion, WestRock and Smurfit estimated.
The transaction is expected to lift Smurfit’s profit by over 20% “by the end of (the) first full year after close,” Seeking Alpha reported. The combined firm’s shares will be traded on the New York Stock Exchange, and Smurfit’s CEO, Tony Smurfit, and its chairman, Irial Finan, will manage the new firm.
“We will have the leading assets, a unique global footprint in both paper and corrugated, significant synergies, and enhanced scale to deliver value in the short, medium and long term,” said Tony Smurfit.
The Packaging Market’s Outlook
Transparency Market Research recently projected that the global flexible packaging market would increase at a compound annual growth rate of 4.9% between 2023 and 2031.
This merger represents a significant consolidation in a fragmented market.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
