The transaction is expected to generate annual cost synergies and performance improvements of approximately $200 million by the end of fiscal 2021.
WestRock Co. and KapStone Paper and Packaging Corp. have signed an agreement in which WestRock will acquire all of the outstanding shares of KapStone for approximately $4.9 billion. KapStone’s chairman, Roger Stone, and president and chief executive officer, Matt Kaplan, have entered into voting agreements to which they have agreed to vote their shares in support of the transaction, subject to certain limitations.
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.
The transaction significantly enhances WestRock’s scale and scope and 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. 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 and will accelerate WestRock’s plans to improve margins in its North American corrugated packaging business.
The addition of KapStone’s West Coast facilities improves WestRock’s ability to serve customers in this 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.
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. 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 expected to close during the quarter ending September 30, 2018. Upon completion of the transaction, KapStone will be integrated into WestRock’s Corrugated Packaging segment.