WestRock awaits final approval of KapStone acquisition

WestRock awaits final approval of KapStone acquisition

Analysis points to DOJ review of KapStone deal as factor on drop in WestRock’s stock price.

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October 24, 2018
Brian Taylor
Financial Paper

An investment advisory website’s analysis of Atlanta-based containerboard producer WestRock is pointing to the lengthy United States Department of Justice (DOJ) review of its proposed acquisition of KapStone Paper and Packaging Corp. as a factor in a 40 percent drop in WestRock’s stock price this year.

An analysis by Jenks Jumps posted Oct. 22 on the SeekingAlpha.com website refers to the DOJ as “currently reviewing a second set of documents [that] will hold up transaction completion until Nov 15.” The analysis adds, however, that “closing is still expected by the end of 2018, subject to DOJ approval.”

The WestRock acquisition of KapStone’s assets was announced in late January 2018, and at the time WestRock predicted the acquisition would close by the end of September 2018.

The SeekingAlpha analysis mentions that “in late September, [Washington-based anti-trust focused periodical] Capitol Forum surfaced antitrust concerns as news. Additional documentation was requested by the DOJ back in April, [and] Kapstone had it gathered and supplied to the DOJ by mid-August. The fear of a negative DOJ decision could be a culprit for the [stock] price decline.”

The article also delves into the ramifications on WestRock’s business model regarding China’s decision to greatly reduce its scrap paper and plastic imports. On the one hand, WestRock runs more than 20 recycling plants that now must market scrap materials carrying less value. On the other hand, WestRock has been able to procure old corrugated containers (OCC) for its own mills at a lower price throughout 2018. The company may also choose to access affordable mixed paper tonnage in the future.

Also factoring into WestRock’s stock volatility, according to SeekingAlpha, is damage caused to WestRock’s Panama City, Florida, mill by Hurricane Michael. On the positive side, SeekingAlpha says online retailing is forecast to continue growing in the U.S., presenting a steady growth market for the corrugated boxes made from WestRock’s containerboard.

 

Containerboard Corrugated Mergers & acquisitions Mixed paper OCC Packaging ocean shipping China