Packaging companies Smurfit Kappa (OTC:SMFKY) and WestRock (NYSE:WRK) have agreed to merge, creating the world's largest listed paper and packaging company valued at nearly $20 billion.
Smurfit Kappa (LON:SKG) shares fell by 9% in London trade on Tuesday, while WestRock stock was up by 7.2% in premarket New York trade.
Analysts noted that the premium offered by Smurfit Kappa was higher than many investors had expected.
Under the terms of the deal, WestRock shareholders will receive one share in the new company, Smurfit WestRock, and $5 in cash for each share they hold, totaling $43.51 per share.
Shareholders of Smurfit Kappa will receive one new Smurfit WestRock share for each share they own, resulting in their ownership of approximately 50.4% of the new company once the deal is completed in the second quarter of 2024.
Smurfit Kappa CEO Tony Smurfit will continue in the same role in the new company, alongside CFO Ken Bowles and Chairman Irial Finan.
Smurfit called the merger a "defining moment" in the global packaging industry.
Morgan Stanley analysts said the negative Smurfit Kappa stock reaction is justified as investors need “more conviction in the achievement of the targeted synergies (there is little operational overlap, so synergies would largely come from costs.”