Shares of KapStone Paper and Packaging Corporation (NYSE:KS), with operations in the paper, packaging, and forest products industries, are soaring nearly 30% Monday as of 10:40 AM EST after news it agreed to be acquired by WestRock Co. (NYSE:WRK).
With the ink dried on the deal where WestRock will acquire all of the outstanding KapStone shares for $35.00, the former will assume roughly $1.36 billion in net debt for a total enterprise value of $4.9 billion. KapStone shareholders will now have the option to receive $35.00 per share in cash or to receive 0.4981 WestRock shares per KapStone share owned.
"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, in a press release.
The acquisition is a smart strategic move for WestRock as the two companies are expected to create roughly $200 million in cost synergies and performance improvements annually by the end of fiscal 2021. The move also helps WestRock expand its footprint on the West Coast and improve the reach of its supply chain. The acquisition is also expected to be immediately accretive to WestRock's adjusted earnings and cash flow but investors should expect WestRock to try and lower its leverage ratio which will climb to more than 3.00 times after the acquisition is financed.