Europe’s Smurfit Kappa in merger discussions with Westrock

(Reuters) -Europe’s paper and packaging major Smurfit Kappa said late on Wednesday that it is in discussions to merge with U.S. paper company Westrock <WRK.N>.

The combined entity would be named Smurfit WestRock and will be domiciled in Ireland with its global headquarters in Dublin. The company did not disclose any financial details of the deal.

The Wall Street Journal, which first reported the merger, said the combined entity could be worth about $20 billion.

Smurfit said the combined entity could log pre-tax cost synergies of more than $400 million on an annual run-rate basis at the end of the first year following the completion of the deal.

Smurfit, which operates in 22 European countries and 13 in South, Central and North America, benefited from a boom in demand for packaging goods and e-commerce during COVID-19 lockdowns, but suffered a setback when economies reopened and producers started cutting back packaging stocks.

The Irish group last month reported a fall in first half core profit as it struggled to offset a year-on-year decline in volumes.

While WestRock, which is the second largest packaging company in the U.S., beat Wall Street expectations for third-quarter profit and said that it remains “focused” on streamlining its portfolio and further reducing costs.

After the deal’s close, the combined entity’s shares would be listed on the New York Stock Exchange (NYSE), the company said, while Smurfit Kappa would de-list from Euronext Dublin.

($1 = 0.9326 euros)

(Reporting by Kanjyik Ghosh and Pratyush Thakur in Bengaluru; Editing by Shailesh Kuber and Dhanya Ann Thoppil)