WestRock Signs Definitive Agreement to Acquire KapStone for $35 per Share

WestRock Signs Definitive Agreement to Acquire KapStone for $35 per Share 

WestRock Co., Atlanta, Ga., USA, and KapStone Paper and Packaging Corp., Northbrook, Ill., this past Monday (Jan. 29, 2018) announced the signing of a definitive agreement, pursuant to which WestRock will acquire all of the outstanding shares of KapStone for $35.00 per share and will assume approximately $1.36 billion in net debt, for a total enterprise value of approximately $4.9 billion.
 
Based on KapStone’s annualized EBITDA performance in the second half of its fiscal 2017, WestRock estimates the EV/EBITDA multiples to be under 10 times before and 7 times after the full run rate of expected cost synergies and performance improvements. Upon closing, the acquisition is expected to be immediately accretive to WestRock’s adjusted earnings and cash flow, inclusive of purchase accounting adjustments. 

KapStone stockholders will have the option to receive $35.00 per share in cash, or to elect to receive 0.4981 WestRock shares per KapStone share, with elections of stock consideration capped at 25% of the outstanding KapStone shares but no limit on the number of KapStone shares that can receive cash consideration. KapStone Chairman Roger Stone and president and CEO Matt Kaplan have entered into voting agreements, pursuant to which they have agreed to vote their shares in support of the transaction, subject to certain limitations.

WestRock will finance the cash consideration through the issuance of new debt under a fully committed financing package. WestRock expects to refinance existing KapStone debt assumed as part of the transaction upon closing. WestRock’s expected leverage ratio at the closing of the transaction will be greater than 3.00x, and WestRock expects to return to its stated leverage ratio target of 2.25x to 2.50x by the end of fiscal 2019. The transaction is not conditional on financing.

Founded in 2005, KapStone is a 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 U.S., Canada, and Mexico. KapStone announced preliminary, unaudited adjusted EBITDA of $130 to $135 million for its fourth quarter 2017.

"KapStone is a great fit with WestRock. Their complementary corrugated packaging and distribution operations will enhance WestRock’s ability to serve customers across our system, particularly in the western U,.S., and the addition of their specialty kraft paper products that we do not make enhances our differentiated portfolio of paper and packaging solutions," said Steve Voorhees, CEO of WestRock. "Importantly, KapStone and WestRock share the same dedication to serving customers. We look forward to welcoming the KapStone team members to WestRock and working with them to help make WestRock an even better company." 

"The agreement to combine with WestRock is a testament to the tremendous company we have built and the hard work and accomplishments of the KapStone team," said Kaplan. "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."

The transaction significantly enhances WestRock’s scale and scope in the market and accelerates WestRock’s ability to achieve its strategic goals and enhance its value proposition as the premier partner and provider of innovative, winning solutions to its customers:

  • Creates opportunity for approximately $200 million in cost synergies and performance improvements.The transaction is expected to generate annual run-rate cost synergies and performance improvements of approximately $200 million by the end of fiscal 2021 that WestRock expects will be captured through the integration of the KapStone operations into WestRock’s corrugated packaging system. The categories of benefits include process and capital improvements at mill and box plant locations, converting and network optimization, procurement and administrative efficiencies. The acquisition will enable WestRock to supply additional corrugated packaging to Victory Packaging. The acquisition will accelerate WestRock’s plans to improve margins in its North American corrugated packaging business.  
  • Strengthens WestRock’s presence on the West Coast. The addition of KapStone’s West Coast facilities improves WestRock’s ability to serve customers in this important area and reduce costs across its supply chain. In addition, this expansion opens new opportunities for WestRock to sell the full suite of its product portfolio to KapStone’s current customers in this region. 
  • Broadens WestRock’s differentiated paper and packaging solutions portfolio with the addition of attractive paper grades and distribution capabilities. The addition of KapStone’s complementary specialty kraft paper offerings that WestRock does not offer today enables WestRock to provide a broader product portfolio to existing customers, as well as provides new opportunities to sell WestRock’s enterprise-wide offerings to KapStone’s customers. 
  • Increases mix of virgin fiber based paper in WestRock’s paper portfolio. KapStone’s 3 million tons of paper is made using 78% virgin fiber and 22% recovered fiber. This increases WestRock’s overall mix of virgin fiber from 65% to 67%. 

The transaction is subject to a number of customary closing conditions, including a vote by KapStone’s stockholders, and is expected to close during the quarter ending Sept. 30, 2018. Upon completion of the transaction, KapStone will be integrated into WestRock’s Corrugated Packaging segment.

Lazard served as lead investment bank and financial advisor to WestRock in the transaction and provided its board of directors with a fairness opinion. Wells Fargo provided the committed financing for the transaction and also acted as WestRock’s financial advisor. Cravath, Swaine & Moore LLP acted as legal advisor to WestRock. 

Rothschild & Co. and Moelis & Company LLC served as financial advisors to KapStone in the transaction. Sidley Austin acted as legal advisor to KapStone. 

WestRock partners with its customers to provide differentiated paper and packaging solutions that help them win in the marketplace. WestRock’s 45,000 team members support customers around the world from more than 300 operating and business locations spanning North America, South America, Europe, Asia, and Australia. More information about WestRock is available online.

KapStone is a producer of containerboard, unbleached kraft paper, and corrugated products, and a provider of packaging and logistics solutions.  The company operates four paper mills, 22 converting plants, and more than 65 warehouses and distribution centers located in North America. The business employs approximately 6,200 people.

Showing 1–20 of 517 results

Filters

Content Type

Industry

Publications

News
Burgo Announces Conversion to Containerboard Plan for Line 2 at Avezzano Mill (2/28/2017)

Burgo Group S.p.A., Italy, one of the main European producers of graphical and special papers, this week announced the start of a conversion plan for Line 2 at the Avezzano (AQ) paper mill, from graphical paper to containerboard, with the view of making the mill a true national center of excellence for “cardboard” production.

News
Stora Enso, Poland, to Install New Andritz FRX Shredder (1/04/2018)

Shredder will process rejects from pulping processes of two existing board production lines at Stora Enso’s Ostrołęka, Poland, mill.

News
SIG Combibloc Digital Solution Monitors Carton Supply Chain, Quality Process (6/19/2017)

Filled aseptic carton packs are printed with individual, unique QR codes at the time of production, trays are printed with unique QR codes, and pallets with barcodes. This provides a convenient digital solution to monitor the supply chain and the quality process from the collection of raw material up to the milk's industrialization and commercialization via a single platform.

News
BillerudKorsnäs Orders New GL&V Equipment for Gruvön Board Mill (1/31/2017)

with Duflo® Pump technology for its new board machine, next-generation project.

News
Mondi Group to Acquire Powerflute Group Holdings (1/03/2018)

Mondi will acquire the Powerflute operations, which includes a 285,000 metric tpy pulp and paper mill in Finland, for EUR 365 million on an enterprise value basis. 

News
NIB, BillerudKorsnäs Sign Loan for New Board Machine in Gruvön, Sweden (3/14/2018)

New board machine will have an annual production capacity of 550,000 metric tons of liquid packaging board, carton board, food service board, and kraftliners.

News
Fire Damages Paper Machine at Carthage Specialty Paperboard (1/02/2018)

Six workers are treated for smoke inhalation, and one is sent to the local hospital. 

News
Kotkamills’ AEGLE Has Landed (3/09/2018)

Product is an ideal packaging material, for example, for the needs of large fast-food chains, and is also suited for short-term packaging of other greasy food-to-go products where a barrier is required.

News
Tetra Pak to Open Carton Closures Production Facility in Asia (2/24/2017)

Tetra Pak, Switzerland, will build a new plant at its Rayong site in Thailand, dedicated to producing closures for carton packaging. The EUR 24 million investment, which will create around 60 jobs when it opens early in 2018, will be capable of producing more than 3 billion closures every year.

News
Andritz to Rebuild Board Machine for Knauf Petroboard (6/13/2017)

New machine in Russia has a design speed of 700 m/min and an annual capacity of 155,000 metric tons for production of gypsum board made of 100% waste paper raw material.

News
Oji Group to Install New Containerboard Machine at Malaysia Mill (1/03/2018)

New machine will add 450,000 metric tpy of liner and corrugating medium capacity, beginning with startup in April 2021.

News
U.S. Boxboard Output a Mixed Bag January (2/28/2017)

Total U.S. boxboard production decreased 0.8% compared with January 2016, but increased 2.2% from last month, according to the AF&PA (Washington, D.C., USA) January 2017 Boxboard Report issued this past week. Unbleached kraft boxboard production decreased over the same month as last year and decreased compared with last month.

News
Cellulose Replaces Plastic in Future Packaging Material (3/16/2018)

Project aim is to develop composite materials from nanocellulose and cellulose, which can be used as a barrier for heat, air, and moisture.

News
WestRock Completes Acquisition of Five Facilities from U.S. Corrugated (6/13/2017)

WestRock intends to integrate 105,000 tons of containerboard converted annually by the acquired facilities and another 50,000 tons under a long-term contract with a newly created company formed from the remaining assets of U.S. Corrugated.

News
Dairy Products Packaging Market to Grow at 4.5%, 2017-2027 (3/13/2018)

Research report covers opportunity assessment along with vital insights on each market segment, developments, and innovations in the current packaging solutions as well as growth drivers positively influencing the expansion of the global dairy products packaging market.

News
Sappi Maastricht Orders Valmet Machine Rebuild to Board Production (2/27/2017)

Valmet, Finland, will rebuild a paper machine for Sappi Maastricht in the Netherlands. With the rebuilt PM 6, Sappi will be able to improve the existing graphical board products and move into producing high quality solid bleached board (SBB) and folding box board (FBB) grades. Today PM 6 is producing coated woodfree (CWF) paper grades. Startup of the rebuilt machine is scheduled for early 2018. The value of the order was not disclosed.

News
Nine Dragons Orders Fifth, Sixth Successive Valmet Containerboard Machines (3/22/2018)

Two new containerboard lines will be designed to produce high-quality testliner grades out of 100% recycled raw materials, as are the four production lines ordered last year.

News
PaperWorks Industries Finalizes Deleveraging and Recapitalization Transaction (3/06/2018)

Recapitalization supported by 98.7% of noteholders and reduced debt by 70%. New capital structure provides foundation for future growth and strategic opportunities. 

News
Tobacco Packaging Market Worth $16.65 Billion by 2022 (6/07/2017)

Market size is estimated to grow from $14.27 billion in 2017 to $16.65 billion by 2022, at a CAGR of 3.1%.

News
U.S. Boxboard Output in February a Mixed Bag (3/19/2018)

Production in February 2018 increased 2.4% compared with February 2017, but decreased 4.8% from last month (January 2018).

Inside this Section