WestRock To Buy 5 Facilities From U.S. Corrugated Holdings

The provider of paper and packaging solutions – WestRock Company (NYSE:WRK) – entered into a definitive agreement to acquire certain operations of U.S. Corrugated Holdings, Inc., a large independent manufacturer of corrugated products for packaging and displays. The buyout will broaden WestRock’s scope in regional markets.

Per the contract, WestRock will acquire five corrugated converting facilities in Ohio, Pennsylvania, and Louisiana, from U.S. Corrugated, through which it will provide a series of products and services to customers. Its products and services span across a variety of end markets, including food and beverage, pharmaceuticals and consumer electronics.

The buyout will enhance WestRock’s capabilities to serve customers across the Midwest. Further, the deal will improve the margins of its corrugated packaging business. Moreover, the transaction will provide significant synergy opportunities through containerboard integration, increased production and improved performance.

Westrock Company Price

Westrock Company Price | Westrock Company Quote

WestRock will pay a total consideration of approximately $192 million, representing an EBITDA multiple of five times on a post-synergy basis. The transaction, which is anticipated to close in Jun 2017, includes cash and WestRock common stock, and will be accretive to earnings in the first year.

WestRock expects to realize significant synergies from supply chain optimization, better procurement and integrating approximately 105,000 tons of the containerboard converted annually by the acquired facilities. It will also secure another 50,000 tons under a long-term contract with a newly created company formed from the remaining assets of U.S. Corrugated.

WestRock continues to benefit from its acquisition strategy. The integration of the volume from the acquisition of the Carolina product line, the Cenveo Packaging acquisition and volume incorporation from the merger will prove conducive to growth.

Additionally, WestRock will gain from higher volumes, favorable mix and productivity, and focus on execution of its capital allocation strategy. Driven by these factors, the stock gained around 38%, outperforming the Zacks categorized Paper and Related Products sub-industry which recorded 19.5% growth, over the past one year.

WestRock currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector are The Chemours Company (NYSE:CC) , Carpenter Technology Corporation (NYSE:CRS) and Ferro Corporation (NYSE:FOE) . All of these stocks boast a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chemours has a remarkable positive average earnings surprise of 39.82% for the last four quarters. Carpenter Technology generated a positive average earnings surprise of 14.30% over the trailing four quarters. Ferro Corporation has delivered an average positive earnings surprise of 19.63% in the past four quarters.

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