REG-Smurfit Kappa Group PLC Statement re Smurfit Kappa and WestRock in discussions regarding key terms of Potential Combination

Smurfit KappaAnnouncement

07/09/2023 07:00

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Statement re Smurfit Kappa and WestRock in discussions regarding key terms of
Potential Combination

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE
A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

Smurfit Kappa and WestRock in discussions regarding key terms of Potential
Combination

7 September 2023

Smurfit Kappa Group (“Smurfit Kappa”) (LSE:SKG; ISE:SKG), a FTSE 100
company, confirms that the boards of directors (the “Boards”) of Smurfit
Kappa and WestRock Company (“WestRock”) (NYSE:WRK), a S&P 500 company,
are discussing the key terms of a potential combination to create Smurfit
WestRock, a global leader in sustainable packaging (the “Potential
Combination”).

The Potential Combination would be expected to involve the creation of a new
holding company, Smurfit WestRock (the “Combined Group”). Smurfit WestRock
would be incorporated and domiciled in Ireland with global headquarters in
Dublin, Ireland and North and South American operations headquartered in
Atlanta, Georgia. The Potential Combination would be effected through an Irish
scheme of arrangement involving Smurfit Kappa and a merger of a subsidiary
with WestRock.

Any such combination would result in WestRock shareholders receiving
consideration consisting primarily of shares of the Combined Group.

Strategic and Operational Rationale

The Boards of Smurfit Kappa and WestRock believe the Potential Combination
will create the global “Go-To” packaging partner of choice:


 * Combining two highly complementary portfolios to create a global leader in
sustainable packaging

 * Unparalleled geographic reach across 42 countries with a significant presence
across both Europe and the Americas

 * Complementary portfolios with unique product diversity and innovative
sustainability capabilities, with breadth and depth across renewable,
recyclable and biodegradable packaging solutions

 * Culturally aligned with strong customer focus

 * Broader opportunities for approximately 100,000 employees

 * Improved operating efficiency and increased returns across over 500 converting
operations and 67 mills

 * Shared sustainability ambitions for a sustainable future

 * Experienced management teams with strong track records of execution and
delivery to support global operations

 * Immediate and long-term value creation opportunity for both sets of
shareholders

Financial Rationale

The Boards of Smurfit Kappa and WestRock believe the Potential Combination
represents a unique opportunity to create value:


 * Combined last twelve months’ revenue and adjusted EBITDA as of 30 June 2023
of approximately $34 billion and $5.5 billion(1), respectively

 * Strong cash flows for future growth and capital returns

 * Targeting annual pre-tax run-rate cost synergies in excess of $400 million at
the end of the first full year following completion; delivery of synergies
expected to require estimated one-off cash costs of approximately $235 million
to be incurred

 * Expected to deliver compelling benefits to Smurfit WestRock shareholders, with
transaction structure providing the opportunity for both sets of shareholders
to participate meaningfully in Smurfit WestRock’s significant upside value
potential

 * Disciplined capital allocation expected to deliver improved operating
efficiency and increased returns

 * Committed to strong investment grade credit rating

Further Details on the Potential Combination


 * Following completion of the Potential Combination:


* Smurfit WestRock’s ordinary shares would be listed on the New York Stock
Exchange (NYSE) and the Combined Group would seek U.S. equity index inclusion
as soon as possible thereafter.

 * Smurfit Kappa’s premium listing on the London Stock Exchange (LSE) is
expected to be cancelled and the Combined Group is expected to list on the
standard listing segment.

 * Smurfit Kappa would de-list from Euronext Dublin.

 * The Combined Group would be incorporated and domiciled in Ireland with global
headquarters in Dublin, Ireland and North and South American operations
headquartered in Atlanta, Georgia.




 * Discussions between the parties remain ongoing regarding the Potential
Combination. Smurfit Kappa and WestRock are engaged in a mutual due diligence
process. The definitive terms and conditions of any transaction will be set
out in a further announcement.

 * Any Potential Combination would be conditional, inter alia, upon the approval
by shareholders of Smurfit Kappa and WestRock and receipt of required
regulatory clearances as well as other customary conditions.

 * There can be no certainty that the Potential Combination or any other
transaction between the parties will be agreed or will occur.

 * This announcement has been made with the consent of WestRock.

Further announcements may be made as and when appropriate.

This announcement contains Inside Information for the purposes of Regulation
(EU) No 596/2014 on Market Abuse (as onshored into UK law by the European
Union (Withdrawal) Act 2018 and the Market Abuse Exit Regulations 2019). The
person responsible for arranging for the release of this announcement on
behalf of Smurfit Kappa is Gillian Carson-Callan, Company Secretary. The date
and time of this announcement is the same as the date and time that it has
been communicated to the media, at 7 am on 7 September 2023.

_________________

(1) Please refer to notes and sources of information and bases of calculation
for further information.

About Smurfit Kappa

Smurfit Kappa, a FTSE 100 company, is one of the leading providers of
paper-based packaging solutions in the world, with more than 47,000 employees
in over 350 production sites across 36 countries and with revenue of €12.8
billion in 2022. We are located in 22 countries in Europe, 13 in the Americas
and one in Africa. We are the only large‑scale pan-regional player in Latin
America. Our products, which are 100% renewable and produced sustainably,
improve the environmental footprint of our customers.

With our proactive team, we relentlessly use our extensive experience and
expertise, supported by our scale, to open up opportunities for our customers.
We collaborate with forward-thinking customers by sharing superior product
knowledge, market understanding and insights in packaging trends to ensure
business success in their markets. We have an unrivalled portfolio of
paper-based packaging solutions, which is constantly updated with our
market-leading innovations.

This is enhanced through the benefits of our integration, with optimal paper
design, logistics, timeliness of service, and our packaging plants sourcing
most of their raw materials from our own paper mills.

We have a proud tradition of supporting social, environmental and community
initiatives in the countries where we operate. Through these projects we
support the UN Sustainable Development Goals, focusing on where we believe we
have the greatest impact.

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About WestRock

WestRock partners with customers to provide differentiated, sustainable paper
and packaging solutions that help them win in the marketplace. WestRock’s
team members support customers around the world from locations spanning North
America, South America, Europe, Asia and Australia. Learn more at
www.westrock.com
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.

Enquiries:

Smurfit Kappa

Ciarán Potts

Head of Investor Relations

T: +353 1 202 7127

E: ir@smurfitkappa.com (mailto:ir@smurfitkappa.com)

Important Additional Information

Neither this announcement nor any copy of it may be taken or transmitted
directly or indirectly into or from any jurisdiction where to do so would
constitute a violation of the relevant laws or regulations of such
jurisdiction. Any failure to comply with this restriction may constitute a
violation of such laws or regulations. Persons into whose possession this
announcement or other information referred to herein should inform themselves
about, and observe, any restrictions in such laws or regulations.

This announcement has been prepared for the purpose of complying with the
applicable law and regulation of the United Kingdom, the United States and
Ireland and information disclosed may not be the same as that which would have
been disclosed if this announcement had been prepared in accordance with the
laws and regulations of jurisdictions outside the United Kingdom, the United
States or Ireland.

Additional Information about the Potential Combination and Where to Find It

In connection with the Potential Combination between Smurfit Kappa and
WestRock, Smurfit Westrock, the combined company (“SW”) would file with
the U.S. Securities and Exchange Commission (the “SEC”) a registration
statement, which would include a proxy statement of WestRock that would also
constitute a prospectus of SW (the “proxy statement/prospectus”). Each of
Smurfit Kappa, WestRock and SW would also file other relevant documents in
connection with the Potential Combination. The definitive proxy
statement/prospectus would be sent to the shareholders of WestRock. Smurfit
Kappa would also publish a shareholder circular approved by the UK Financial
Conduct Authority (the “FCA”), which would be sent to Smurfit Kappa’s
shareholders or otherwise made available in accordance with Smurfit Kappa’s
articles of association and the UK Listing Rules. SW would publish a
prospectus approved by the FCA, which would be made available in accordance
with Rule 3.2 of the UK Prospectus Regulation Rules (the “UK listing
prospectus”). This communication is not a substitute for any registration
statement, proxy statement/prospectus, UK listing prospectus or other document
Smurfit Kappa, WestRock and/or SW may file with the SEC or applicable
securities regulators in the United Kingdom and Ireland in connection with the
Potential Combination. BEFORE MAKING ANY VOTING OR INVESTMENT DECISIONS,
INVESTORS, STOCKHOLDERS AND SHAREHOLDERS OF SMURFIT KAPPA AND WESTROCK ARE
URGED TO READ CAREFULLY AND IN THEIR ENTIRETY THE REGISTRATION STATEMENT, THE
PROXY STATEMENT/PROSPECTUS, THE SHAREHOLDER CIRCULAR AND THE UK LISTING
PROSPECTUS, AS APPLICABLE, AND ANY OTHER RELEVANT DOCUMENTS THAT WOULD BE
FILED WITH THE SEC OR APPLICABLE SECURITIES REGULATORS IN THE UNITED KINGDOM
AND IRELAND, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, IN
CONNECTION WITH THE POTENTIAL COMBINATION WHEN THEY BECOME AVAILABLE, AS THEY
WOULD CONTAIN IMPORTANT INFORMATION ABOUT SMURFIT KAPPA, WESTROCK, SW, THE
POTENTIAL COMBINATION AND RELATED MATTERS. The registration statement and
proxy statement/prospectus and other documents filed by Smurfit Kappa,
WestRock and SW with the SEC, when filed, would be available free of charge at
the SEC’s website at www.sec.gov
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.sec.gov&esheet=53550502&newsitemid=20230906229053&lan=en-US&anchor=www.sec.gov&index=7&md5=b9e75390edf2f7144f37e4e2039f5e37)
. In addition, investors and shareholders would be able to obtain free copies
of the proxy statement/prospectus and other documents filed with the SEC by
WestRock online at ir.westrock.com/ir-home/, upon written request delivered to
1000 Abernathy Road, Atlanta, Georgia or by calling (770) 448-2193, and would
be able to obtain free copies of the registration statement, proxy
statement/prospectus, shareholder circular, UK listing prospectus and other
documents which would be filed with the SEC and applicable securities
regulators in the United Kingdom and Ireland by SW or Smurfit Kappa online at
www.smurfitkappa.com/investors
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.smurfitkappa.com%2Finvestors&esheet=53550502&newsitemid=20230906229053&lan=en-US&anchor=www.smurfitkappa.com%2Finvestors&index=8&md5=021d57b3ce83a9b498f5092e400c2db2)
, upon written request delivered to Beech Hill, Clonskeagh, Dublin 4, Ireland
or by calling +353 1 202 7127. The information included on, or accessible
through, Smurfit Kappa’s or WestRock’s website is not incorporated by
reference into this communication.

This communication is for informational purposes only and is not intended to,
and shall not, constitute an offer to sell or buy or the solicitation of an
offer to sell or buy any securities, nor shall there be any sale of securities
in any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to appropriate registration or qualification under the
securities laws of any such jurisdiction. No offering of securities shall be
made except by means of a prospectus meeting the requirements of Section 10 of
the U.S. Securities Act of 1933, as amended.

Participants in the Solicitation of Proxies

This communication is not a solicitation of proxies in connection with the
Potential Combination. However, under SEC rules, Smurfit Kappa, WestRock, SW,
and certain of their respective directors, executive officers and other
members of the management and employees may be deemed to be participants in
the solicitation of proxies in connection with the Potential Combination.
Information about WestRock’s directors and executive officers may be found
in its 2022 Annual Report on Form 10-K filed with the SEC on November 18,
2022, available at ir.westrock.com/ir-home/ and www.sec.gov
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. Information about Smurfit Kappa’s directors and executive officers may be
found in its 2022 Annual Report filed with applicable securities regulators in
the United Kingdom on March 28, 2023, available on its website at
www.smurfitkappa.com/investors
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. These documents can be obtained free of charge from the sources indicated
above. Additional information regarding the interests of such potential
participants in the solicitation of proxies in connection with the Potential
Combination will be included in the proxy statement/prospectus and other
relevant materials filed with the SEC when they become available.

Information Regarding Forward-Looking Statements

This communication contains forward-looking statements as that term is defined
in Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended by the Private Securities
Litigation Reform Act of 1995. Forward-looking statements can sometimes be
identified by the use of forward-looking terms such as “believes,”
“expects,” “may,” “will,” “shall,” “should,” “would,”
“could,” “potential,” “seeks,” “aims,” “projects,”
“predicts,” “is optimistic,” “intends,” “plans,”
“estimates,” “targets,” “anticipates,” “continues” or other
comparable terms or negatives of these terms or other variations or comparable
terminology or by discussions of strategy, plans, objectives, goals, future
events or intentions, but not all forward-looking statements include such
identifying words.

Forward-looking statements are based upon current plans, estimates and
expectations that are subject to risks, uncertainties and assumptions. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
indicated or anticipated by such forward-looking statements. We can give no
assurance that such plans, estimates or expectations will be achieved and
therefore, actual results may differ materially from any plans, estimates or
expectations in such forward-looking statements. Important factors that could
cause actual results to differ materially from such plans, estimates or
expectations include: the parties may not enter into an agreement providing
for the Potential Combination; a condition to the closing of the Potential
Combination may not be satisfied; the occurrence of any event that can give
rise to termination of the Potential Combination; a regulatory approval that
may be required for the Potential Combination is delayed, is not obtained in a
timely manner or at all or is obtained subject to conditions that are not
anticipated; Smurfit Kappa is unable to achieve the synergies and value
creation contemplated by the Potential Combination; Smurfit Kappa is unable to
promptly and effectively integrate WestRock’s businesses; management’s
time and attention is diverted on issues related to the Potential Combination;
disruption from the Potential Combination makes it more difficult to maintain
business, contractual and operational relationships; credit ratings decline
following the Potential Combination; legal proceedings are instituted against
Smurfit Kappa or WestRock; Smurfit Kappa or WestRock are unable to retain or
hire key personnel; the announcement or the consummation of the Potential
Combination has a negative effect on the market price of the capital stock of
Smurfit Kappa or WestRock or on Smurfit Kappa or WestRock’s operating
results; evolving legal, regulatory and tax regimes; changes in economic,
financial, political and regulatory conditions, in Ireland, the United
Kingdom, the United States and elsewhere, and other factors that contribute to
uncertainty and volatility, natural and man-made disasters, civil unrest,
pandemics (e.g., the coronavirus (COVID-19) pandemic (the “COVID-19
pandemic”)), geopolitical uncertainty, and conditions that may result from
legislative, regulatory, trade and policy changes associated with the current
or subsequent Irish, U.S. or U.K. administrations; the ability of Smurfit
Kappa or WestRock to successfully recover from a disaster or other business
continuity problem due to a hurricane, flood, earthquake, terrorist attack,
war, pandemic, security breach, cyber-attack, power loss, telecommunications
failure or other natural or man-made event, including the ability to function
remotely during long-term disruptions such as the COVID-19 pandemic; the
impact of public health crises, such as pandemics (including the COVID-19
pandemic) and epidemics and any related company or governmental policies and
actions to protect the health and safety of individuals or governmental
policies or actions to maintain the functioning of national or global
economies and markets; actions by third parties, including government
agencies; the risk that disruptions from the Potential Combination will harm
Smurfit Kappa’s or WestRock’s business, including current plans and
operations; certain restrictions during the pendency of the Potential
Combination that may impact Smurfit Kappa’s or WestRock’s ability to
pursue certain business opportunities or strategic transactions; Smurfit
Kappa’s or WestRock’s ability to meet expectations regarding the
accounting and tax treatments of the Potential Combination; the risks and
uncertainties discussed in the “Risks and Uncertainties” section in
Smurfit Kappa’s reports available on the National Storage Mechanism at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism and on its website at
https://www.smurfitkappa.com/investors
(https://cts.businesswire.com/ct/CT?id=smartlink&url=https%3A%2F%2Fwww.smurfitkappa.com%2Finvestors&esheet=53550502&newsitemid=20230906229053&lan=en-US&anchor=https%3A%2F%2Fwww.smurfitkappa.com%2Finvestors&index=11&md5=d507f982296c53db90d518315b145286)
; and the risks and uncertainties discussed in the “Risk Factors” and
“Information Regarding Forward-Looking Statements” sections in
WestRock’s reports filed with the SEC. These risks, as well as other risks
associated with the Potential Combination, will be more fully discussed in the
proxy statement/prospectus, the shareholder circular, the UK listing
prospectus and the other relevant materials filed with the SEC and applicable
securities regulators in the United Kingdom. The list of factors presented
here should not be considered to be a complete statement of all potential
risks and uncertainties. Unlisted factors may present significant additional
obstacles to the realization of forward-looking statements. We caution you not
to place undue reliance on any of these forward-looking statements as they are
not guarantees of future performance or outcomes and that actual performance
and outcomes, including, without limitation, our actual results of operations,
financial condition and liquidity, and the development of new markets or
market segments in which we operate, may differ materially from those made in
or suggested by the forward-looking statements contained in this
communication. Except as required by law, none of Smurfit Kappa, WestRock or
SW assume any obligation to update or revise the information contained herein,
which speaks only as of the date hereof.

Nothing in this announcement should be construed as a profit estimate or
profit forecast. No statement in this announcement, including statements
regarding the potential effect of the Potential Combination on cash flows and
capital returns should be interpreted to mean that cash flows or capital
returns of Smurfit Kappa, WestRock or SW for the current or future financial
years would necessarily match or exceed the historical cash flows or capital
returns of Smurfit Kappa or WestRock.

Completion of the Potential Combination would be subject to the satisfaction
of several conditions as referenced elsewhere in this announcement.
Consequently, there can be no certainty that the completion of the Potential
Combination would be forthcoming.

This announcement is not a prospectus for the purposes of the UK Prospectus
Regulation Rules or the EU Prospectus Regulation. It has been prepared solely
for the Potential Combination referred to in this announcement.

Certain figures contained in this announcement, including financial
information, have been subject to rounding adjustments. Accordingly, in
certain instances, the sum or percentage change of the numbers contained in
this announcement may not conform precisely with the total figure given.
Except as explicitly stated in this announcement, none of the contents of
Smurfit Kappa's or WestRock's websites, nor any website accessible by
hyperlinks on Smurfit Kappa's or WestRock's websites, is incorporated in or
forms part of, this announcement.

Notes

Unless otherwise stated: financial information relating to Smurfit Kappa has
been extracted or derived from the audited results for the twelve months ended
31 December 2022 and unaudited results for the six months ended 30 June 2023
and financial information relating to WestRock has been extracted or derived
from the audited results for the twelve months ended 30 September 2022, and
the unaudited results up until the third quarter ended 30 June 2023.

Smurfit Kappa financials are prepared under IFRS and certain adjustments have
been made to prepare the estimated adjusted EBITDA for Smurfit WestRock. This,
and certain other statements, are based on non-IFRS and non-US GAAP financial
information on Smurfit Kappa and WestRock. These statements may be subject to
amendment in the Circular and Prospectus.

Sources of information and bases of calculation


 1. Any references to Smurfit WestRock adjusted EBITDA are based on the following
estimates and adjustments:


2. Smurfit Kappa’s EBITDA of €2,230 million for the last twelve months, as
of
30 June 2023, less operating lease expenses of €108 million, and converted
to U.S. Dollars using an exchange rate of 1.05x, being the average exchange
rate over the last twelve months ended 30 June 2023, implying a Smurfit Kappa
EBITDA of $2,289 million; and

 3. WestRock’s pro forma EBITDA of $3,228 million for the last twelve months, as
of 30 June 2023, which is based on the following pro forma adjustments:


1. WestRock EBITDA of $3,162 million;

2. Subtracting the estimated EBITDA contribution from Joint Ventures and
Associates of $30 million;

3. Subtracting the estimated EBITDA contribution from RTS Packaging of $37
million;

4. Adding back estimated EBITDA contribution from Gondi of $59 million; and

5. Adding back share-based compensation of $75 million.

 4. Subtracting the estimated EBITDA contribution from Joint Ventures and
Associates of $30 million;

 5. Subtracting the estimated EBITDA contribution from RTS Packaging of $37
million;

 6. Adding back estimated EBITDA contribution from Gondi of $59 million; and

 7. Adding back share-based compensation of $75 million.







ENDS



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