WestRock said the transaction was valued at $4.9bn, including net debt of about $1.36bn, is set to close in Q3 this year, and is expected to generate synergies of about $200m by 2022.
West Rock is rapidly transforming itself into a dominant player in the corrugated industry in North America.
These are two of the top 10 players in the US and this acquisition will likely cement West Rock’s position in the top five.
Aside from the synergy savings, WestRock expects the acquisition to strengthen its presence on the US West Coast, broaden its differentiated paper and packaging solutions portfolio with the addition of attractive paper grades and distribution capabilities, and increase the mix of virgin fiber based paper in WestRock’s paper portfolio.
Founded in 2005 and headquartered in Northbrook, Illinois, KapStone is a leading North American producer and distributor of containerboard, corrugated products and specialty papers, including liner and medium containerboard, kraft papers and saturating kraft. KapStone also owns Victory Packaging, a packaging solutions distribution company with facilities in the United States, Canada and Mexico.
KapStone announces preliminary, unaudited adjusted EBITDA of $130 to $135m for its fourth quarter 2017.
WestRock said it’s expected leverage ratio at the closing of the transaction will be greater than 3.00x, and it expects to return to its stated leverage ratio target of 2.25x to 2.50x by the end of fiscal 2019.
Nicholas Mockett, head of packaging M&A at Moorgate Capital, told Packaging News: “This deal is likely to generate significant synergies and will enhance the industry structure. Customers are likely to benefit from a stronger player being able to serve them in more locations. There is a sense of history repeating itself here – Roger Stone previously built up Stone Container and merged it with Smurfit Corporation of the USA before selling to Rock Tenn, now West Rock, for around $9bn in 2011.”
Steve Voorhees, chief executive of WestRock, said the deal was a ’great fit’ for WestRock: “Their complementary corrugated packaging and distribution operations will enhance WestRock’s ability to serve customers across our system, particularly in the western United States, and the addition of their specialty kraft paper products that we do not make enhances our differentiated portfolio of paper and packaging solutions.”
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.”