425: Smurfit Kappa Announces Circular Publication for Proposed WestRock Combination

Smurfit Kappa has published a shareholder circular regarding the proposed combination with WestRock to form Smurfit WestRock, outlining the terms and conditions of the scheme of arrangement and actions for shareholders.

Summary

• Smurfit Kappa has announced the publication of a shareholder circular concerning the proposed combination with WestRock to create Smurfit WestRock.
• The UK Financial Conduct Authority (FCA) has approved the circular.
• The circular contains the full terms and conditions of the scheme of arrangement and an explanatory statement.
• It details the actions required by Smurfit Kappa shareholders for the Irish High Court convened shareholder meeting (Scheme Meeting) and an Extraordinary General Meeting (EGM).
• A prospectus for Smurfit WestRock Limited, which will be renamed Smurfit WestRock plc, has also been approved by the FCA.
• The prospectus relates to the proposed admission of Smurfit WestRock's ordinary shares to the standard listing segment of the Official List of the FCA and trading on the London Stock Exchange (LSE).
• The Scheme Meeting will be held at 10:00 a.m. on 13 June 2024 in Dublin, Ireland.
• The EGM will be held at 10:15 a.m. on 13 June 2024, or shortly after the Scheme Meeting, at the same location.
• The combination is conditional upon the sanction of the Scheme by the Irish High Court and approval by Smurfit Kappa shareholders.
• The Smurfit Kappa board of directors unanimously recommends that shareholders vote in favor of the Scheme Resolution and the EGM Resolutions.
• Copies of the Circular and related documents are available on Smurfit Kappa's website and for inspection at their registered office and at Matheson LLP in Dublin.
• The expected Scheme Effective Date and Completion date is 5 July 2024.
• The combination will be implemented through an acquisition by Smurfit WestRock of Smurfit Kappa and a merger of a Smurfit WestRock subsidiary with WestRock, with WestRock surviving as a wholly-owned subsidiary.
• Upon completion, both Smurfit Kappa and WestRock will become wholly-owned subsidiaries of Smurfit WestRock.
• Smurfit Kappa shares will be delisted from the FCA, LSE, and Euronext Dublin, while WestRock shares will be delisted from the NYSE.
• Smurfit WestRock shares will be listed on the NYSE and admitted to the standard listing segment of the Official List of the FCA and trading on the LSE.
• Smurfit WestRock has filed a registration statement with the US SEC, including a prospectus relating to the offer and sale of Smurfit WestRock Shares to WestRock stockholders.
• WestRock has filed a definitive proxy statement with the US SEC regarding the special meeting of WestRock Shareholders.
• The document includes forward-looking statements regarding the combination, its benefits, and future expectations, which are subject to risks and uncertainties.
• Citi and PJT Partners are acting as financial advisors to Smurfit Kappa in connection with the Combination.

Sentiment

Score: 7

Explanation: The document is largely procedural, outlining the steps for a major merger. The unanimous recommendation from the Smurfit Kappa board is a positive sign, but the inherent risks of such a large integration temper the overall sentiment.

Positives

• The Smurfit Kappa board of directors unanimously recommends that shareholders vote in favor of the Scheme Resolution and the EGM Resolutions, indicating strong support from leadership.
• The combination is expected to create a leading global packaging company with enhanced scale and capabilities.
• Listing on both the NYSE and LSE could increase the visibility and accessibility of Smurfit WestRock shares to a broader investor base.

Negatives

• The document contains forward-looking statements that are subject to various risks and uncertainties, meaning the expected benefits of the combination may not be fully realized.
• The delisting of Smurfit Kappa and WestRock shares from their respective exchanges could temporarily impact shareholder value or trading liquidity.
• The integration of two large companies like Smurfit Kappa and WestRock carries inherent risks and could lead to unforeseen challenges.

Risks

• The combination is subject to various conditions, including regulatory approvals and shareholder votes, which could delay or prevent the transaction from completing.
• The integration of Smurfit Kappa and WestRock's businesses may be more difficult or costly than anticipated, potentially impacting the expected synergies and value creation.
• Changes in economic, financial, political, and regulatory conditions could adversely affect the combined group's performance.
• The combined group may face challenges in retaining key personnel or maintaining business relationships during and after the integration process.
• Legal proceedings may be instituted against Smurfit WestRock, Smurfit Kappa, or WestRock in connection with the combination.

Future Outlook

The document outlines the expected steps and conditions for the completion of the combination between Smurfit Kappa and WestRock, leading to the formation of Smurfit WestRock. The future outlook depends on the successful completion of these steps and the subsequent integration of the two businesses.

Management Comments

• The Chair of Smurfit Kappa has provided a letter recommending that Smurfit Kappa Shareholders vote in favour of the Scheme Resolution and the EGM Resolutions.

Industry Context

This announcement reflects a trend towards consolidation in the packaging industry, with companies seeking to achieve greater scale, efficiency, and geographic reach. The combination of Smurfit Kappa and WestRock would create a major player in the global packaging market, potentially impacting competitors and industry dynamics.

Comparison to Industry Standards

• The merger of equals between Smurfit Kappa and WestRock is similar to other large-scale mergers in the packaging industry, such as the merger between Bemis and Amcor.
• The listing of Smurfit WestRock on both the NYSE and LSE is a strategy employed by other global companies to enhance their visibility and access to capital markets.
• The expected synergies from the combination will be closely watched by investors and analysts, as they are a key driver of value creation in mergers and acquisitions.

Stakeholder Impact

• Shareholders of Smurfit Kappa and WestRock will be impacted by the exchange of their shares for shares in Smurfit WestRock.
• Employees of Smurfit Kappa and WestRock may experience changes in their roles and responsibilities as a result of the integration.
• Customers and suppliers of Smurfit Kappa and WestRock may benefit from the combined group's enhanced scale and capabilities.
• The combination could impact competitors in the packaging industry.

Next Steps

• Smurfit Kappa Shareholders to vote on the Scheme Resolution and the EGM Resolutions.
• WestRock stockholders to approve the Transaction Agreement.
• Obtain merger control clearances or non-objections in certain jurisdictions.
• Sanction of the Scheme by the Irish High Court.
• Delisting of Smurfit Kappa shares from the FCA, LSE, and Euronext Dublin.
• Delisting of WestRock shares from the NYSE.
• Listing of Smurfit WestRock shares on the NYSE and admission to the standard listing segment of the Official List of the FCA and trading on the LSE.

Key Dates