The American packaging company WestRock wants to merge with Smurfit Kappa, the largest European supplier of paper and packaging materials. Together the companies would have a turnover of 34 billion dollars (31.8 billion euros). The two listed companies made their announcement on Thursday known that they are having far-reaching conversations.
Smurfit WestRock, as the new umbrella holding company is to be called, has a link with the Netherlands: in 2005, British-Irish entrepreneur Tony Smurfit took over the paper company Kappa (an abbreviation of the words cardboard production and paper) Packaging.
In 2018, Smurfit Kappa also bought the Parenco paper factory in Renkum. In the Netherlands, the company has approximately twenty branches that make boxes and packaging, from fruit trays to bulk cardboard.
Smurfit Kappa is now a European packaging giant with 48,000 employees, active in 35 countries. In the past six months, turnover fell sharply, after a peak during the corona pandemic. The packaging industry faced a shortage of paper during the corona crisis. There was so much demand for packaging materials for online orders that paper prices more than doubled.
WestRock has 58,000 employees and three hundred production locations. The merger should save the companies $400 million in annual costs, with an expected $235 million in one-off costs to complete the merger. The new combination will soon have 67 paper mills (which mix and process fibers into cardboard or paper) and 100,000 employees.
Strict recycling requirements
Together, the companies are better able to invest in the innovations necessary for the EU sustainability requirements. The EU is working on it new legislation to allow the packaging industry to reuse more material. According to figures from the EU In 2020, every EU citizen threw away an average of 177 kilos of packaging material per year, of which forty percent was paper and cardboard and twenty percent plastic. The amount of packaging material grew partly due to the popularity of online shopping.
Currently, 70 percent of paper is collected in the EU. By 2030 this should be 85 percent. According to trade association CEPI half of the paper fibers come from waste paper. Adding new fibers is necessary anyway, because paper fibers are possible 5 to 7 times being used.
Investors in the US responded positively to the plans: WestRock’s share price initially rose by more than 5 percent. In Europe, Smurfit Kappa lost 2 percent of its price. The takeover still must be approved by shareholders and competition authorities.
A version of this article also appeared in the September 8, 2023 newspaper.