- Transaction enhances position as a leading
provider of innovative and winning solutions to customers in
attractive corrugated packaging market -- Highly accretive
acquisition with significant synergy potential -
WestRock Company (NYSE:WRK) (“WestRock”) and KapStone Paper and
Packaging Corporation (NYSE:KS) (“KapStone”) announced today 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’s
chairman, Roger Stone, and president and chief executive officer,
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 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 $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 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,”
said Steve Voorhees, chief executive officer 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.”
Strategic Benefits
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 September 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.
Conference CallWestRock will host a conference
call today, January 29, 2018, at 8:30 a.m., Eastern Time, to
discuss the transaction. The conference call, which will be webcast
live, an accompanying slide presentation, and this press release
can be accessed at ir.westrock.com.
Investors who wish to participate in the webcast via
teleconference should dial 833-287-0804 (inside the U.S.) or
647-689-4463 (outside the U.S.) at least 15 minutes prior to the
start of the call and enter the passcode 4387815. Replays of
the call can be accessed at ir.westrock.com.
Forward-Looking StatementsThis release contains
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Any statements in
this communication about WestRock’s and KapStone’s expectations,
beliefs, plans or forecasts, including statements regarding the
proposed transaction among Whiskey Holdco, Inc. (“Holdco”),
WestRock and KapStone, the expected timetable for completing the
transaction, benefits and synergies of the transaction and future
opportunities for the combined company and products and securities,
that are not historical facts are forward-looking statements. These
statements are typically identified by words or phrases such as
"may," "will," "could," "should," "would," "anticipate,"
"estimate," "expect," "project," "intend," "plan," "believe,"
"target," "prospects," "potential" and "forecast," and other words,
terms and phrases of similar meaning. Forward-looking statements
involve estimates, expectations, projections, goals, forecasts,
assumptions, risks and uncertainties. WestRock and KapStone caution
readers that a forward-looking statement is not a guarantee of
future performance and that actual results could differ materially
from those contained in the forward-looking statement. Such
forward-looking statements include statements such as that (i) the
transaction enhances WestRock’s position as a leading provider of
innovative and winning solutions to customers in attractive
corrugated packaging market, (ii) the acquisition is highly
accretive with significant synergy potential, (iii) upon closing,
the acquisition is expected to be immediately accretive to
WestRock’s adjusted earnings and free cash flow, inclusive of
purchase accounting adjustments, (iv) WestRock will finance the
cash consideration through the issuance of new debt under a fully
committed financing package, (v) WestRock expects to refinance
existing KapStone debt assumed as part of the transaction upon
closing, (vi) WestRock’s expected leverage ratio at closing is
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, (vii)
KapStone’s complementary containerboard and corrugated packaging
operations will enhance WestRock’s ability to serve customers
across its system, particularly in the western United States,
(viii) the addition of KapStone’s kraft paper products that
WestRock does not make enhances WestRock’s differentiated portfolio
of paper and packaging solutions, (ix) 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 unrivaled
provider of winning solutions to its customers, (x) the transaction
creates opportunity for approximately $200 million in cost
synergies and performance improvements: (a) 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 will be captured through the integration of the KapStone
operations into WestRock’s corrugated packaging system; (b) the
categories of benefits include process and capital improvements at
mill and box plant locations, converting and network optimization,
procurement and administrative efficiencies; (c) the acquisition
will enable WestRock to supply additional corrugated packaging to
Victory Packaging; and (d) the acquisition will accelerate
WestRock’s plans to improve margins in its North American
corrugated packaging business; (xi) the transaction strengthens
WestRock’s presence on the West Coast, (xii) the addition of
KapStone’s West Coast facilities improves WestRock’s ability to
serve customers in this important market and reduce costs across
WestRock’s supply chain, (xiii) the expansion opens new
opportunities for WestRock to sell the full suite of its product
portfolio to KapStone’s current customers in this region; (xiv) the
transaction broadens product portfolio in attractive paper grades
and enhances WestRock’s differentiated paper and packaging
solutions portfolio, (xv) 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, (xvi)
transaction increases the mix of virgin fiber based paper in
WestRock’s paper portfolio; (xvii) the acquisition will increase
WestRock’s overall mix of virgin fiber from 65% to 67%; (xviii) the
transaction is expected to close during the September quarter of
fiscal 2018 and (xix) KapStone will be integrated into WestRock’s
Corrugated Packaging segment. With respect to these statements,
assumptions have been made regarding, among other things, the
results and impacts of the acquisition of KapStone; whether and
when the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act expires or terminates; whether and when antitrust
approvals in Austria, Canada, Germany and Mexico are obtained;
whether and when the other conditions to the completion of the
KapStone acquisition, including the receipt of KapStone shareholder
approval, will be satisfied; economic, competitive and market
conditions generally; volumes and price levels of purchases by
customers; competitive conditions in WestRock's and KapStone’s
businesses and possible adverse actions of their customers,
competitors and suppliers. Further, WestRock's and KapStone’s
businesses are subject to a number of general risks that would
affect any such forward-looking statements. Such risks and other
factors that may impact management's assumptions are more
particularly described in WestRock’s and KapStone’s filings with
the Securities and Exchange Commission (“SEC”). The information
contained herein speaks as of the date hereof and neither WestRock
nor KapStone has or undertakes any obligation to update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
applicable law.
Additional Information and Where to Find It
This communication may be deemed to be solicitation material in
respect of the proposed transaction among Holdco, WestRock and
KapStone. In connection with the proposed transaction, Holdco
intends to file with the SEC a registration statement on Form S-4
(the “Registration Statement”), which will include a prospectus
with respect to shares of Holdco’s common stock to be issued in the
proposed transaction and a proxy statement for KapStone’s
stockholders (the “Proxy Statement”) and KapStone will mail the
Proxy Statement to its stockholders and file other documents
regarding the proposed acquisition with the SEC.
Stockholders of WestRock and KapStone are urged to read all
relevant documents filed with the SEC, including the Registration
Statement and the Proxy Statement, because they will contain
important information about the proposed transaction.
Investors and security holders are able to obtain the documents
(once available) free of charge at the SEC’s web site,
http://www.sec.gov. In addition, investors and security holders may
obtain free copies of the documents filed with the SEC or by
sending a request to KapStone’s corporate secretary at KapStone
Paper and Packaging Corporation, 1101 Skokie Boulevard, Suite 300,
Northbrook, IL 60062. Such documents are not currently
available.
Participants in Solicitation WestRock, Holdco
and KapStone and their respective directors and executive officers
may be deemed to be participants in the solicitation of proxies
from the holders of shares of KapStone common stock in respect of
the proposed transaction. Information about the directors and
executive officers of WestRock is set forth in the proxy statement
for WestRock’s 2018 Annual Meeting of stockholders, which was filed
with the SEC on December 19, 2017. Information about the directors
and executive officers of KapStone is set forth in the proxy
statement for KapStone’s 2017 Annual Meeting of stockholders, which
was filed with the SEC on April 5, 2017. Investors may obtain
additional information regarding the interest of such participants
by reading the Registration Statement and the Proxy Statement (once
available).
About WestRockWestRock (NYSE:WRK) partners with
our 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. Learn more at
www.WestRock.com.
About KapStoneHeadquartered in Northbrook, IL,
KapStone is a leading North American 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.
WestRockInvestors:James Armstrong,
470-328-6327Vice President – Investor
Relationsjames.armstrong@westrock.com
John Stakel, 678-291-7901Senior Vice President –
Treasurerjohn.stakel@westrock.com
Media: John Pensec, 470-328-6397Director, Corporate
Communicationsmediainquiries@westrock.com
KapStoneAndrea K.
Tarbox, 847-239-8812Executive Vice President and Chief
Financial OfficerAndrea.Tarbox@KapStonePaper.com
Kapstone Paper And Packaging Corp. (NYSE:KS)
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