Smurfit chief defends switching main listing to New York after WestRock deal
Irish group’s tie-up with US rival will create world’s largest packaging company
The head of paper and packaging group Smurfit Kappa has defended the decision to switch the company’s primary listing to New York as part of a merger with US rival WestRock, saying that he expects the combined group will achieve a higher valuation on Wall Street.
Dublin-based Smurfit is ditching its main listing in London and leaving the blue-chip FTSE 100 index in favour of New York, where shares of WestRock already trade.
The tie-up between the groups comes as the benefits from a pandemic-driven boom in ecommerce fades, dragging the shares of Smurfit, WestRock and rival International Paper down from highs hit in 2021.
“We want to gravitate towards a market that has much more liquidity and higher ratings,” said Tony Smurfit, who will be chief executive of the combined group, which will be called Smurfit WestRock.
“And if we’re the best, which I think we will be, in time, then we will have a significantly higher rating than we currently have, which obviously will translate into significant value creation for our owners,” he added.
The decision underlines the challenges facing a London market that over the past year has missed out on the initial public offering of UK chipmaker Arm and suffered a severe slowdown in listings. Smurfit WestRock will retain a standard listing in London.
Under the terms of the deal announced on Tuesday, Smurfit shareholders will own 50.4 per cent of the combined company and WestRock investors will own the remaining 49.6 per cent.
The deal values each WestRock share at $43.51, a 28 per cent premium to the stock’s closing price on Tuesday and 36 per cent above where it was trading before the companies disclosed last week that they were in talks.
Shares in Smurfit fell 8 per cent on Tuesday, with analysts at JPMorgan saying that investors had expected the deal to have a smaller premium. WestRock shares gained 7 per cent in pre-market trading in New York.
Tony Smurfit, who has run the Irish group since 2015, shrugged off the fall in the share price, saying that “when people understand the transaction and see the potential benefit, I think that [the share price] will come back strongly”.
“We believe together we’ll be much stronger. And so, you know, there’s a price to be paid for that,” he added. Smurfit WestRock expects to be the world’s largest packaging company by revenues in packaging, surpassing International Paper.
The two companies first began talks eight months ago after WestRock approached Smurfit about an initial deal that was not pursued.
David Sewell, chief executive of WestRock, said that combining the groups would provide a “truly comprehensive offering of packaging solutions for customers and delivers meaningful value to our shareholders today and into the future”.
Smurfit and WestRock, which has its headquarters in Atlanta, expect to wring $400mn of synergies from the deal in the first year after its completion.
The merger “gives us 65 per cent of our business in the Americas, which justifies the reason why we should be in the United States”, Smurfit said. “If you’ve just a small [US] presence, I don’t think it makes sense,” he added of the listing decision.
Despite the post-pandemic slowdown, Smurfit was upbeat on the outlook for the paper and packaging industry. “I think the corrugated packaging business, the speciality consumer business have a fantastic future . . . the replacement of plastic products in a more and more sustainable world is going to be replaced by our products.”