Smurfit-WestRock: Package deal

In September, Irish packaging company Smurfit Kappa made the $11 billion purchase of US counterpart WestRock, creating the world’s largest packaging company by revenue, one with $34 billion in turnover.

Posted mercredi, novembre 29 2023
Smurfit-WestRock: Package deal

In the e-commerce age, demand for packaging has risen dramatically, and those best-positioned to supply this demand stand to profit handsomely. This led to a willingness in the boardrooms on both sides of the Atlantic to agree to a merger which sees WestRock leapfrog International Paper as the biggest packaging company in the United States. Smurfit-Kappa, already the largest cardboard group in Europe, rejected a $9.5 billion takeover bid from International Paper in 2018.

In an interview with Bloomberg following the announcement of the deal, Smurfit Kappa CFO Ken Bowles explained the reasoning behind targeting WestRock, “If you look at our portfolio, the big gap was North America, and the opportunities that come from ourselves and WestRock being able to cross-sell in each other’s markets is incredible. From a cultural, people and geographic fit, Westrock made the most sense.”

Sustainable packaging
The tie up also adds consumer packaging expertise to the Smurfit Kappa portfolio, a considerable advantage as brands continue the shift to more sustainable forms of packaging. This autumn, Amazon debuted automated packing machines covering each individual item with the minimum amount of packaging necessary.

The Covid pandemic and subsequent lockdowns saw packaging companies hit record highs of profit and production

A statement on the WestRock website outlining the strategic and operational rationale for the deal claimed it would create “a global leader in sustainable packaging” with around 100,000 employees and 67 production facilities with “complementary portfolios with unique product diversity and innovative sustainability capabilities, with breadth and depth across renewable, recyclable and biodegradable packaging solutions.”

Under the terms of the merger, Smurfit-WestRock will be headquartered in Dublin and have Tony Smurfit as CEO. Analysts estimate the combined entity would have market shares of around 20% in the corrugated packaging market in Europe and North America. The deal, subject to regulatory approval, is expected to close in the first quarter of 2024.

Paper money
Commerce has always need cardboard containers in vast quantities but with the advent of Amazon and e-commerce demand has skyrocketed. The Covid pandemic and subsequent lockdowns saw packaging companies hit record highs of profit and production. According to a report in the New York Times, by 2025, the international market for corrugated packaging will reach $205 billion.

In July, Smurfit Kappa opened its first production facility in Africa, a 270,000-square-foot packaging factory Rabat, Morocco. The Middle East and Africa is seen as a significant growth market, which analysts believe could be worth $2 billion by 2030.

This is not the first US packaging company the Irish outfit, founded in Rathmines district of Dublin in 1934, has bought. Orange County Container, a US-based packaging company, was acquired for $340 million in 2012.