Activist investor urges Smurfit Kappa to reconsider WestRock deal

Smurfit Kappa (SMFTF) shares dipped in the early part of Thursday’s session after activist investor Primestone Capital expressed concerns about the company’s proposed acquisition of WestRock (NYSE:).

Primestone, which owns around 0.8% of the packaging company, has reservations regarding the deal and urged the company to consider alternative deals that could create more value for Smurfit Kappa shareholders.

Primestone called on Smurfit to revive talks regarding a merger with International Paper. “SKG’s Board rejected International Paper’s friendly approach in 2018 on valuation grounds, but many parameters have changed since then, and an attractive deal may now be possible,” said Primestone in a letter to the Smurfit Kappa board.

“Today we believe SKG’s stock to be materially undervalued, which reflects investors’ concerns about the proposed Westrock acquisition that shaded almost $2bn off its market capitalisation over a few weeks,” they added.

Overall, Primestone believes the Westrock transaction “risks deteriorating SKG’s business profile” by creating a higher-cost, less integrated company whilst “increasing leverage for modest financial benefits for SKG’s shareholders.”

Smurfit shares dipped to 3,164p per share at the start of Thursday’s session, but they have since recovered and are now up around 0.85% at 3,210p.