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WestRock (WRK) Engages in Merger Talks With Smurfit Kappa
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As per reports, packaging companies WestRock Company (WRK - Free Report) and Smurfit Kappa Group Plc (SMFKY - Free Report) are in talks for a potential merger, which is expected to create a global leader in sustainable packaging.
The tie-up is expected to create new holding company, Smurfit WestRock. The entity will have a combination of two highly complementary portfolios with unique product diversity and innovative sustainability capabilities. The combined market capitalization of WestRock and Smurfit Kappa is around $18.9 billion (as of Sep 6, 2023).
Smurfit WestRock will have an unmatched geographic reach spanning 42 countries with a significant presence in both Europe and the Americas. Given this scale, the merged entity is expected to be the global “Go-To” packaging partner, per the management of both the companies.
The combination will lead to improved operating efficiency and increased returns across more than 500 converting operations and 67 mills. The merged entity’s combined last twelve months’ revenues and adjusted EBITDA were around $34 billion and $5.5 billion, respectively (as of 30 Jun, 2023). The WestRock-Smurfit Kappa combination is expected to result in annual pre-tax run-rate cost synergies of more than $400 million in the first year following its completion.
Any potential combination is subject to the approval of shareholders of both the companies, the receipt of required regulatory clearances as well as other customary conditions. There is no assurance, however, at this time whether the deal will be finalized not.
Smurfit WestRock would be incorporated and domiciled in Ireland with global headquarters in Dublin, Ireland and North and South American operations headquartered in Atlanta, GA. WestRock shareholders could receive shares of the combined entity.
Both WestRock and Smurfit Kappa Group plc are major players in the Paper and Related Products industry. Recently, the industry has been impacted by weak packaging demand, as customer spending has been muted due to inflationary pressures. Nevertheless, increasing packaging requirements due to the rising trend in e-commerce activities and steady demand from consumer-oriented end markets, such as food and beverages and healthcare, are expected to support the industry.
The growing preference for paper as a sustainable and eco-friendly packaging option due to environmental concerns will act as a key driver for the industry going forward. The companies are thus working on boosting their capacity to capitalize on this packaging demand.
WestRock currently carries a Zacks Rank #3 (Hold).
Shares of WestRock have fallen 21.1% in the past year compared with the industry’s 7.8% decline.
The earnings estimate for Carpenter Technology’s current year is pegged at $3.48 per share, indicating year-over-year growth of 205%. CRS beat the Zacks Consensus Estimate in all the last four quarters, with the average earnings surprise being 10%. The company’s shares have rallied 84% in the past year.
Hawkins has an average trailing four-quarter earnings surprise of 25.5%. The Zacks Consensus Estimate for HWKN’s fiscal 2024 earnings is pegged at $3.40 per share. The consensus estimate for 2024 earnings has moved 38% north in the past 60 days. Its shares have gained 66% in the last year.
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WestRock (WRK) Engages in Merger Talks With Smurfit Kappa
As per reports, packaging companies WestRock Company (WRK - Free Report) and Smurfit Kappa Group Plc (SMFKY - Free Report) are in talks for a potential merger, which is expected to create a global leader in sustainable packaging.
The tie-up is expected to create new holding company, Smurfit WestRock. The entity will have a combination of two highly complementary portfolios with unique product diversity and innovative sustainability capabilities. The combined market capitalization of WestRock and Smurfit Kappa is around $18.9 billion (as of Sep 6, 2023).
Smurfit WestRock will have an unmatched geographic reach spanning 42 countries with a significant presence in both Europe and the Americas. Given this scale, the merged entity is expected to be the global “Go-To” packaging partner, per the management of both the companies.
The combination will lead to improved operating efficiency and increased returns across more than 500 converting operations and 67 mills.
The merged entity’s combined last twelve months’ revenues and adjusted EBITDA were around $34 billion and $5.5 billion, respectively (as of 30 Jun, 2023). The WestRock-Smurfit Kappa combination is expected to result in annual pre-tax run-rate cost synergies of more than $400 million in the first year following its completion.
Any potential combination is subject to the approval of shareholders of both the companies, the receipt of required regulatory clearances as well as other customary conditions. There is no assurance, however, at this time whether the deal will be finalized not.
Smurfit WestRock would be incorporated and domiciled in Ireland with global headquarters in Dublin, Ireland and North and South American operations headquartered in Atlanta, GA. WestRock shareholders could receive shares of the combined entity.
Both WestRock and Smurfit Kappa Group plc are major players in the Paper and Related Products industry. Recently, the industry has been impacted by weak packaging demand, as customer spending has been muted due to inflationary pressures. Nevertheless, increasing packaging requirements due to the rising trend in e-commerce activities and steady demand from consumer-oriented end markets, such as food and beverages and healthcare, are expected to support the industry.
The growing preference for paper as a sustainable and eco-friendly packaging option due to environmental concerns will act as a key driver for the industry going forward. The companies are thus working on boosting their capacity to capitalize on this packaging demand.
WestRock currently carries a Zacks Rank #3 (Hold).
Shares of WestRock have fallen 21.1% in the past year compared with the industry’s 7.8% decline.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the basic materials space are Carpenter Technology Corporation (CRS - Free Report) and Hawkins, Inc. (HWKN - Free Report) . CRS and HWKN each sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The earnings estimate for Carpenter Technology’s current year is pegged at $3.48 per share, indicating year-over-year growth of 205%. CRS beat the Zacks Consensus Estimate in all the last four quarters, with the average earnings surprise being 10%. The company’s shares have rallied 84% in the past year.
Hawkins has an average trailing four-quarter earnings surprise of 25.5%. The Zacks Consensus Estimate for HWKN’s fiscal 2024 earnings is pegged at $3.40 per share. The consensus estimate for 2024 earnings has moved 38% north in the past 60 days. Its shares have gained 66% in the last year.