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January 30, 2018

WestRock closes in on $5 billion takeover of KapStone

American corrugated packaging giant WestRock has agreed to acquire smaller rival company KapStone Paper and Packaging Corp in a deal valued at about $4.9 billion, including the assumption of KapStone’s net debt of around $1.36 billion.

By Adele Berti

American corrugated packaging giant WestRock has agreed to acquire smaller rival company KapStone Paper and Packaging Corp in a deal valued at about $4.9 billion, including the assumption of KapStone’s net debt of around $1.36 billion.

The takeover is set to be completed by Q3 this year and it is expected to generate revenues worth around $200 million by the end of fiscal 2021.

Georgia-based WestRock is the No.2 packaging company in the US after International Paper. It recently acquired Multi Packaging Solutions International and sold its division that manufactures soap dispensers and perfume sprayers in order to focus on its paper and packaging ranges.

Located in Illinois, KapStone specialises in the production and distribution of containerboard, corrugated products and specialty papers. It owns Victory Packaging, a packaging solutions distribution company with facilities in the US, Canada and Mexico.

Steve Voorhees, CEO at WestRock, said that the deal was a ‘great fit’ for both companies.

“Their complementary corrugated packaging and distribution operations will enhance WestRock’s ability to serve customers across our system, particularly in the western US, and the addition of their specialty kraft paper products that we do not make enhances our differentiated portfolio of paper and packaging solutions,” Voorhees said.

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WestRock and KapStone are among the top ten players in the US and the recent acquisition could enhance the former’s chances to rise to the top spot.

Through this deal, WestRock also intends to claim a more prominent role in the US West Coast, broaden its differentiated paper and packaging solutions portfolio with the addition of paper grades and distribution capabilities.

The acquisition will enable WestRock to increase the mix of virgin fibre-based paper in the company’s paper portfolio. KapStone will, instead, be integrated into WestRock’s corrugated packaging system.

WestRock claimed sales in its first quarter increased by 13% on higher price and shipments and that it expects to refinance KapStone’s debt.

The company also added that its expected ratio will be greater than 3.00x by the end of the transactions and it expects it to return to its stated target of 2.25x to 2.50x at the termination of fiscal 2019.

Matt Kaplan, KapStone chief executive, added: “The transaction enables us to deliver an immediate and compelling cash premium to our shareholders. As we began to understand WestRock’s principles, we realized how closely aligned our cultures are. As a result, we believe strongly that this will be beneficial to both our employees and customers.”

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