WestRock announced the agreement on its website, where a copy of the press release is located.
KapStone stockholders will have the option to receive $35 per share in cash, or elect to receive 0.4981 WestRock shares per KapStone share, with elections of stock consideration capped at 25 percent 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.
KapStone announced preliminary, unaudited adjusted earnings before interest, taxes, depreciation and amoritization 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.”
The deal is expected to broaden 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.
The agreement Increases the mix of virgin fiber based paper in WestRock’s paper portfolio. KapStone’s 3 million tons of paper is made using 78 percent virgin fiber and 22 percent recovered fiber.
This increases WestRock’s overall mix of virgin fiber from 65 percent to 67 percent.
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.
Upon completion of the transaction, KapStone will be integrated into WestRock’s Corrugated Packaging segment.
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.
KapStone 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.