US packaging company WestRock to buy KapStone Paper and Packaging for $3.5 bn
30 January 2018
US packaging company WestRock Co yesterday struck a deal to buy smaller rival KapStone Paper and Packaging Corp for about $3.5 billion to boost its revenues in the booming US ecommerce market.
This would be the biggest deal for WestRock after it was established in 2015.
Under the terms of the deal, WestRock will pay $35 per share, and assume about $1.36 billion of KapStone's debt.
KapStone shareholders will have the option to receive $35.00 per share in cash, or receive 0.4981 WestRock shares per KapStone share, with elections of stock consideration capped at 25 per cent of the outstanding KapStone shares but no limit on the number of KapStone shares that can receive cash consideration.
KapStone's chairman, Roger Stone, and president and chief executive officer, Matt Kaplan, have entered into voting agreements and have agreed to vote their shares to the transaction.
WestRock will finance the cash consideration through the issuance of new debt under a fully committed financing package. The transaction is not conditional on financing.
The transaction is expected to generate annual run-rate cost synergies of around $200 million by the end of fiscal 2021 through integration of the KapStone operations into WestRock's corrugated packaging system.
WestRock, which has 45,000 employees, said the acquisition would strengthen its business on the West Coast, improve margins in the corrugated packaging business, and will accelerate its plans to improve margins in its North American corrugated packaging business.
The deal would add four KapStone paper mills to WestRock's current 27, including a mill in North Carolina, two in South Carolina, and one in Washington.
The acquisition of KapStone, which has about $3.2 billion in annual sales, would make the combined company have annual sales of nearly $20 billion.
Founded in 2005 and based in Illinois, KapStone is a leading North American producer and distributor of containerboard, corrugated products and specialty papers, including liner and medium containerboard, kraft papers and saturating kraft.
KapStone also owns Victory Packaging, a packaging solutions distribution company with facilities in the US, Canada and Mexico.
WestRock was created in 2015 through the merger of Richmond-based MeadWestvaco Corp. and Georgia-based Rock-Tenn Co. and is the second-biggest packaging company in the US behind International Paper Co.
''KapStone is a great fit with WestRock. Their complementary corrugated packaging and distribution operations will enhance WestRock's ability to serve customers across our system, particularly in the western United States, and the addition of their specialty kraft paper products that we do not make enhances our differentiated portfolio of paper and packaging solutions,'' said Steve Voorhees, CEO of WestRock.