September 13, 2023: Shares of packaging giant Smurfit Kappa fell 10% on Tuesday after the company announced plans to merge with U.S. peer WestRock. The deal, still subject to regulatory approval, would create the world’s largest packaging company.
The merger would combine Smurfit Kappa’s corrugated packaging business with WestRock’s containerboard and paper packaging businesses. The combined company would have an annual revenue of around $35 billion.
The announcement of the merger was met with mixed reactions from investors. Some investors welcomed the deal, saying it would create a more efficient and competitive packaging company. Others expressed concerns about the combined company’s size and the potential for job cuts.
The fall in Smurfit Kappa’s shares suggests that investors are concerned about the potential for job cuts and other disruptions due to the merger. The company has said that it expects to achieve annual cost savings of $500 million within three years of the merger.
The merger between Smurfit Kappa and WestRock is the latest in a wave of consolidation in the packaging industry. Several major packaging companies have merged in recent years, including International Paper and MeadWestvaco, RockTenn, and Packaging Corporation of America.
The consolidation in the packaging industry is being driven by several factors, including the increasing demand for packaging, the need to reduce costs, and the need to compete with larger companies. The merger between Smurfit Kappa and WestRock will likely accelerate the consolidation trend in the packaging industry.
Here are some actional and practical takeaways from the article:
Here is a simple framework for understanding the merger: