By Padraic Halpin and Yadarisa Shabong DUBLIN (Reuters) -Ireland's Smurfit Kappa is buying U.S. rival WestRock for an agreed $11 billion to create the ...
STORY CONTINUES BELOW THESE SALTWIRE VIDEOSBy Padraic Halpin and Yadarisa Shabong
Smurfit Kappa shares dropped 10%, while WestRock's were up 7.2% in pre-market trade on Tuesday, as analysts said the premium paid by the Irish company was higher than most of its investors had hoped for. The deal represents a 28% premium to Monday's closing price and Smurfit Kappa finance chief Ken Bowles, who will take the same role in the new company, told Reuters that was a fairly normal market rate but was not the important part of the deal.
Smurfit Kappa CEO Tony Smurfit and chair Irial Finan will also keep their roles in the new company after talks Bowles said kicked off over the last eight months. Smurfit Kappa reported a fall in first-half core profit last month as it struggled to offset the decline in volumes but predicted inventory reductions by customers were coming to an end with scope to increase box prices again as demand recovers.
The companies' combined adjusted core profit of $5.5 billion and revenue of about $34 billion for the year ended June 30 would put it clear of nearest rivals International Paper and Ball CorporationThe combined entity will target pretax cost savings of more than $400 million at the end of the first full year following completion at a one-off cash cost of around $235 million.