US paper packaging group WestRock has caved in to giving additional details on its $25 billion-plus (€23 billion) merger with Smurfit Kappa to lower the risk of it being delayed by litigation, after several shareholders alleged that documents on the deal omitted “material information”.
Smurfit Kappa, Ireland’s first multinational company, aims to complete the tie-up in early July, subject to its shareholders giving their approval at an extraordinary general meeting next week.
The agreement to create Smurfit WestRock, the world’s largest cardboard box maker with about $34 billion of annual revenue was announced last September.
WestRock moved on Thursday to “voluntarily supplement” a prospectus on the planned merger, after three shareholders sent demand letters – and followed up with by filing of legal complaints – alleging certain information gaps rendered the original document “false and misleading” and in breach of US securities laws. The claims are rejected by WestRock and Smurfit Kappa.
“WestRock and Smurfit WestRock believe that the claims asserted in the demand letters and in the complaints are without any merit and that no supplemental disclosure is required under applicable laws,” WestRock said.
However, it bowed to providing additional information “in order to reduce the risk of the complaints or demand letters delaying or adversely affecting the completion of the combination and to minimise the costs, risks and uncertainties inherent in litigation”.
The additional disclosures includes confirmation that a committee of independent WestRock directors that had been set up to assess Smurfit Kappa’s offer were entitled to “reasonable” travel expenses, but not additional fees, incurred during the process.
While the original document said that neither side of the deal discussed post-merger employment for WestRock’s management when the agreement was struck, the update clarified that none of the takeover bids – or counterproposals – during eight months of talks before the accord discussed the possible retention of the US company’s management in an enlarged group.
It has subsequently been disclosed that WestRock’s chief executive, David Sewell, and chief financial officer Alexander Pease will exit after the merger goes through, and that they stand to receive a combined $45 million by way of “golden parachute” compensation.
Smurfit Kappa chief executive Tony Smurfit and his chief financial officer Ken Bowles will lead the new group, Smurfit WestRock.
The updated prospectus also offers additional details on what investment banks Lazard and Evercore had considered when assessing the fairness of Smurfit Kappa’s offer for WestRock.
These included WestRock’s earnings estimates for its cardboard box-making and consumer packaging divisions for this year. These were used as a basis for establishing a value for the US business.
A spokeswoman for Smurfit Kappa declined to comment on the prospectus update.
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