Smurfit Kappa and WestRock investors back $25bn tie-up ahead of Iseq exit

Investors in cardboard box maker Smurfit Kappa and US rival WestRock backed the planned $25 billion-plus (€23 billion) merger in meetings on Thursday, paving the way for a deal to create the world’s largest paper and packaging group.

The transaction is on track to close on July 5th and will see the enlarged group, Smurfit WestRock, dropping its Irish stock market quotation and moving its main listing from London to New York.

Trading of Smurfit Kappa shares in Dublin will cease at the close of business on July 2nd. It will end the first Irish multinational group’s association with the exchange that stretches back 60 years, except for a period in the noughties when it was in the hands of private equity.

Smurfit Kappa shareholders voted by an overwhelming majority of almost 99 per cent in favour of the tie-up as the company held an extraordinary general meeting (egm) on Thursday morning. It was approved by WestRock investors hours later in the US.

The WestRock deal is essentially a takeover by Smurfit Kappa that will see its shareholders own 50.4 per cent of the enlarged group, which will remain headquartered in Dublin. Smurfit Kappa chief executive Tony Smurfit and its chief financial officer, Ken Bowles, will run the new group.

[ WestRock gives more detail on merger to get $25bn Smurfit deal over line ]

The outlook for the industry has improved significantly from when the merger agreement was announced last September. At the time, box-makers were dealing with a slump in demand that followed a global spike in spending on physical goods, from TVs to patio furniture, during pandemic lockdowns.

It has also been helped by consolidation elsewhere in the sector, with US-based International Paper, which made an unwanted bid for Smurfit Kappa in 2018, agreeing in April to acquire DS Smith in the UK

WestRock, last week, caved in to giving additional details of its deal with Smurfit Kappa to lower the risk of it being delayed by litigation, after several shareholders alleged that documents on the deal omitted “material information”.

WestRock issued a “voluntarily supplement”, a prospectus on the planned merger, after three shareholders sent demand letters – and followed up by filing complaints in a New York court – alleging certain information gaps rendered the original document “false and misleading” and in breach of US securities laws. The claims were rejected by WestRock and Smurfit Kappa.

The additional disclosures included confirmation that a committee of independent WestRock directors that had been set up to assess Smurfit Kappa’s offer were entitled to “reasonable” travel expenses, but not additional fees, incurred during the process.

While the original document said that neither side of the deal discussed post-merger employment for WestRock’s management when the agreement was struck, the update clarified that none of the takeover bids – or counterproposals – during eight months of talks before the accord discussed the possible retention of the US company’s management in an enlarged group.

It has subsequently been disclosed that WestRock’s chief executive, David Sewell, and chief financial officer Alexander Pease will exit after the merger goes through, and that they stand to receive a combined $45 million by way of “golden parachute” compensation.