WestRock (WRK) Set To Acquire Plymouth Packaging's Assets

WestRock Company (NYSE:WRK) has entered into agreement to acquire substantially all of the assets of Plymouth Packaging, Inc. The buyout will boost WestRock’s margin performance and growth prospects in corrugated packaging business. The deal will also improve its innovation platform and differentiation strategy.

Why Plymouth?

Plymouth is a corrugated packaging company that derives approximately 70% of sales from its Box on Demand systems and corrugated fanfold, and 30% from traditional corrugated box packaging. The company installs Box on Demand machines at its customers’ sites under multi-year exclusive agreements for the fanfold corrugated supply. It currently supplies more than 100 customers with proprietary Box on Demand machines, manufactured by Panotec.

The Deal

As part of the deal, WestRock will buy Plymouth’s equity interest in Panotec, and Plymouth’s exclusive right to distribute Panotec’s equipment in the United States and Canada.

Moreover, the acquisition includes Plymouth’s fanfold corrugated facilities in Battle Creek, MI; Ft. Worth, TX; and Mechanicsburg, PA; and all of its Box on Demand machines located at customers’ facilities. The transaction is subject to customary closing conditions.

Benefits of the Deal

The acquisition of Plymouth will further integrate WestRock’s containerboard system. WestRock currently provides one-third of the nearly 60,000 tons of containerboard used by Plymouth annually and intends to fully integrate these after the transaction closes. WestRock expects additional containerboard integration opportunities post buyout.

The addition of the Box on Demand system will enhance WestRock’s differentiation in e-commerce and other custom applications where on-site box making is required. The acquisition will also improve the company’s automated packaging systems business.

Share Price Performance

WestRock has outperformed the industry in a year’s time. The company has gained 18.7%, while the industry registered growth of 13.8% during this time frame.

Zacks Rank & Key Picks

WestRock carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are Sappi Ltd. (OTC:SPPJY) , Stora Enso Oyj (OTC:SEOAY) and UPM-Kymmene Oyj (OTC:UPMKY) , all carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Sappi has a long-term earnings growth rate of 7.6%. Its shares have gained 2.1%, year to date.

Stora Enso has a long-term earnings growth rate of 9.6%. So far this year, its shares have rallied 46.1%.

UPM-Kymmene has a long-term earnings growth rate of 15.6%. The stock has appreciated 21.7% during the same time frame.

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