Lazard served as lead investment bank and financial advisor to WestRock in the transaction and provided its board of directors with a fairness opinion. Wells Fargo provided the committed financing for the transaction and also acted as WestRock’s financial advisor. Cravath, Swaine & Moore LLP acted as legal advisor to WestRock. Rothschild & Co. and Moelis & Company LLC served as financial advisors to KapStone in the transaction. Sidley Austin acted as legal advisor to KapStone.
WestRock Company (NYSE:WRK) (“WestRock”) and KapStone Paper and Packaging Corporation (NYSE:KS) (“KapStone”) announced today the signing of a definitive agreement, pursuant to which WestRock will acquire all of the outstanding shares of KapStone for $35.00 per share and will assume approximately $1.36 billion in net debt, for a total enterprise value of approximately $4.9 billion.
Based on KapStone’s annualized EBITDA performance in the second half of its fiscal 2017, WestRock estimates the EV/EBITDA multiples to be under 10 times before and 7 times after the full run rate of expected cost synergies and performance improvements. Upon closing, the acquisition is expected to be immediately accretive to WestRock’s adjusted earnings and cash flow, inclusive of purchase accounting adjustments.
KapStone stockholders will have the option to receive $35.00 per share in cash, or to elect to receive 0.4981 WestRock shares per KapStone share, with elections of stock consideration capped at 25% 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. WestRock’s expected leverage ratio at the closing of the transaction will be greater than 3.00x, and WestRock expects to return to its stated leverage ratio target of 2.25x to 2.50x by the end of fiscal 2019. The transaction is not conditional on financing.
Founded in 2005 and headquartered in Northbrook, Illinois, KapStone is a leading North American producer and distributor of containerboard, corrugated products and specialty papers, including liner and medium containerboard, kraft papers and saturating kraft. KapStone also owns Victory Packaging, a packaging solutions distribution company with facilities in the United States, Canada and Mexico. KapStone announces preliminary, unaudited adjusted EBITDA of $130 to $135 million for its fourth quarter 2017.
The Cravath team is led by partners Richard Hall (Picture) and Andrew C. Elken and includes associates Maya A. Rosenthal-Larrea and James J. Valenza and foreign associate attorney Caspar J. Haarmann on M&A matters; partners Andrew J. Pitts and George E. Zobitz, senior attorney Christopher J. Kelly and associates Steven Y. Li and Joshua S. Aronoff on financing matters; partner J. Leonard Teti II and associate Arvind Ravichandran on tax matters; and partner Jennifer S. Conway and associates Matthew Cantor, Matthew J. Bobby and Jana I. Hymowitz on executive compensation and benefits matters. Alison E. Beskin also worked on executive compensation and benefits matters.
Involved fees earner: Richard Hall – Cravath Swaine & Moore; Andrew C. Elken – Cravath Swaine & Moore; Maya Rosenthal-Larrea – Cravath Swaine & Moore; Caspar Haarmann – Cravath Swaine & Moore; Andrew Pitts – Cravath Swaine & Moore; George E. Zobitz – Cravath Swaine & Moore; Christopher Kelly – Cravath Swaine & Moore; Steven Y. Li – Cravath Swaine & Moore; J. Leonard Teti II – Cravath Swaine & Moore; Arvind Ravichandran – Cravath Swaine & Moore; Jennifer Conway – Cravath Swaine & Moore; Matthew Cantor – Cravath Swaine & Moore; Matthew Bobby – Cravath Swaine & Moore; Jana Hymowitz – Cravath Swaine & Moore;
Law Firms: Cravath Swaine & Moore;
Clients: WestRock Company ;