Smurfit Kappa shares jump on news of S&P 500 inclusion after merger

Smurfit Kappa shares jumped as much as 4.7 per cent in Dublin on Wednesday. The rise came on the back of news that the enlarged group being formed from its merger with US cardboard box-making peer WestRock is on track to be included in S&P Dow Jones indices after the deal goes through next month.

This includes the S&P 500, the most keenly followed stock market index in the world by investors.

S&P Dow Jones said that for index implementation purposes WestRock will be considered the surviving merged entity as the two companies come together in a $25 billion-plus (€23.3 billion) deal to form Smurfit WestRock. This is in spite of the fact that Smurfit Kappa is technically acquiring WestRock.

The transaction is on track to close on July 5th and will see Smurfit WestRock drop its Irish stock market quotation and move its main listing from London to New York.

WestRock is already on the S&P 500. S&P cautioned in its statement, which was issued late on Tuesday in New York, that the plan to include Smurfit WestRock is “only a preliminary announcement”, so it may be subject to change.

Analysts, including Brian Morgan and Morgan Stanley, said news of Smurfit WestRock’s inclusion in S&P indices has come sooner than expected.

Smurfit Kappa shares closed 4.2 per cent higher at €44.26 in Dublin, off their earlier highs.

CRH, the former long-standing biggest company on the Iseq in Dublin, quit the Irish market last September and moved its main listing from London to New York in an effort to join the S&P 500. However, its chief financial officer, Jim Mintern, indicated to reporters in April that it could take 12 to 18 months for the construction materials and services giant’s efforts to be included in S&P indices to play out.

Betting group Flutter Entertainment has also pinned its hopes on eventual inclusion in S&P indices after moving its primary listing from London to New York in May. The owner of Paddy Power left the Irish stock market in January.

Shareholders in Smurfit Kappa and WestRock approved the imminent tie-up at separate meetings last Thursday in Dublin and Atlanta, Georgia.

Trading of Smurfit Kappa shares in Dublin will cease at the close of business on July 2nd, before the merger is completed. 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.

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.

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.