- Irish packaging firm agrees US merger
- Shares fall after WestRock investors favoured
- Logistics company DX Group under offer
Despite claims by chief executive Tony Smurfit that a combination of Smurfit Kappa (SKG) with US peer WestRock (WRK:NYSE) – itself the product of a merger – would be ‘fantastic for shareholders in the long term’, the market reaction to the deal suggests not everyone is convinced.
After falling around 4% last Thursday when the Irish packaging firm first revealed it was in talks with WestRock, the shares were the FTSE 100’s biggest losers today, dropping another 10% to £27.50 on confirmation of the merger.
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WHY ARE THE SHARES DOWN?
The merged group, to be known as Smurfit WestRock, will be one of the largest packaging manufacturers in the world with combined sales of $34 billion and EBITDA (earnings before interest, taxes, depreciation and amortisation) of $5.5 billion over the 12 months to the end of June.
The Irish firm claims the deal will increase its earnings by high single digits in the short term and by more than 20% by the end of the first full year following completion once synergies are included.
The new group will have a primary listing in New York and a standard rather than premium listing in London, with WestRock shareholders receiving one new share for each existing share they own plus $5 in cash, meaning a total consideration of $43.51 or an 11% premium to last Wednesday’s price, while Smurfit shareholders will just get one new share for each share they currently own.
Interviewed on CNBC, Tony Smurfit explained his rationale for the deal: ‘We’ve always said we had a very big gap in our portfolio because we were not involved in the United States. We’ve been looking over many years to figure out a way to get in there in a way that would reward our shareholders over the long term.’
DX GROUP IN BID TALKS
Meanwhile, logistics firm DX Group (DX.:AIM) revealed yesterday afternoon it had received an all-cash offer at 48p per share from private equity investor HIG European Capital Partners.
The news sent the shares up nearly 18% to 43p, quite a different reaction to Smurfit Kappa, as it was revealed HIG had made several prior proposals to DX Group, all of which were rejected.
If successful, this would be third takeover of a UK logistics firm after US group GXO bought out Clipper last year and Xpediator was bought by a consortium of investors including its former chief executive in July, leaving Wincanton (WIN) and a handful of other smaller companies listed.
