Newsworthy

Paper, Mergers & Acquisitions

Smurfit Kappa strikes deal to acquire WestRock

Smurfit Kappa and WestRock have officially struck a deal, with reports confirming Irish paperboard and packaging company Smurfit Kappa has purchased Atlanta-based WestRock for $11.2 billion, creating an industry giant known now as Smurfit WestRock.

The companies released a joint statement Sept. 12 announcing the merger, which is expected to close in the second quarter of 2024.

“This incredibly exciting coming together of our two great companies is a defining moment within the global packaging industry,” says Smurfit Kappa CEO Tony Smurfit, who will become CEO of Smurfit WestRock.

“We will have the leading assets, a unique global footprint in both paper and corrugated, a superb consumer and specialty packaging business, significant synergies and enhanced scale to deliver value in the short, medium and long term.”

Smurfit WestRock will have unparalleled geographic and product diversity with a culturally aligned customer focus and enhanced capabilities to serve customers globally, the companies say in the statement. Smurfit Kappa and WestRock generated a combined adjusted annual revenue of approximately $34 billion over the last 12 months, which, according to the companies, makes Smurfit WestRock the largest listed global packaging partner by revenue.

“We look forward to working with Smurfit Kappa to build a leading global platform that harnesses the strength of WestRock’s consumer portfolio, presents a truly comprehensive offering of packaging solutions for customers and delivers meaningful value to our shareholders today and into the future,” WestRock CEO David Sewell says.

“Smurfit Kappa shares our deep commitment to innovation across the packaging life cycle, and we are confident that Smurfit WestRock will continue to lead the industry forward. I’m grateful to WestRock’s team members, whose hard work has made this combination possible, and excited for the many opportunities that will arise from becoming part of the partner of choice in our industry.”

In a move first reported by the Wall Street Journal, Smurfit WestRock will be incorporated and domiciled in Ireland with global headquarters in Dublin and North and South American operations headquartered in Atlanta.

Current Smurfit Kappa Chair Irial Finan will stay on as chair of Smurfit WestRock and Smurfit Kappa Chief Financial Officer Ken Bowles will keep that title at Smurfit WestRock.

“We believe that all shareholders will benefit through ownership of a world-leading, sustainable packaging business [and] the combination of two of the industry’s most experienced teams with a proven track record of delivery and a diverse product portfolio and compelling innovation offering,” Finan says.

Both WestRock and Smurfit Kappa are major consumers of recovered fiber. In fiscal year 2022, WestRock consumed 5.5 million tons of recovered fiber, while Smurfit Kappa, Europe’s largest paper and packaging producer, consumed about 8.8 million tons, according to the companies’ respective sustainability reports. The merger gives Smurfit WestRock a presence in 42 countries and brings together 500 converting operations and 67 mills.

WestRock has been moving forward with its footprint optimization strategy this summer, most recently announcing the closure of its paper mill in Tacoma, Washington, in what is the latest in a string of closures for the company that is targeting high-cost operations that need significant capital investment.

In its most recent third-quarter financial report, the company says it’s looking at further converting consolidations and reduction in average mill costs to drive additional savings. WestRock’s $5.1 billion in net sales are down 7.2 percent year over year in the third quarter, and the company reports 359,000 tons of economic downtime, negatively affecting its adjusted earnings before interest, taxes, depreciation and amortization by $89 million.

Meanwhile, Smurfit Kappa’s most recent half-year financial results show a 9 percent decrease in revenue at 5.8 billion euros ($6.2 billion), and the company reports 144,000 tons of downtime taken at its European mills in the first half of this year.

Metals, Mergers & Acquisitions

US Steel considers bids

An Aug. 29 letter to shareholders from the two top executives of Pittsburgh-based United States Steel Corp. says the company’s board of directors is engaged in an open-ended process to review more than one bid it has received from potential buyers of the company.

Fellow steelmaker Cleveland-Cliffs has been the most prominent bidder, though it was joined for about 10 days by Pennsylvania-based steel service center operator Esmark Inc. before the bid was put on hold Aug. 23.

Esmark is a processor and distributor of value-added flat-rolled steel and the third-largest domestic producer of tin plate steel.

Beyond those two bids, any others have remained out of public view. However, the letter from U.S. Steel President and CEO David B. Burritt and board Chair David S. Sutherland refers to “multiple credible bidders.”

The duo also says interest in U.S. Steel consists of multiple unsolicited proposals, ranging from the acquisition of parts of the company to consideration for acquiring all of U.S. Steel. The Cleveland-Cliffs bid falls into the latter category, as described by the Cleveland-based company’s announcements.

Burritt and Sutherland say the current management team’s effort involving “moving down the cost curve and moving up the talent curve” is one of the reasons U.S. Steel is receiving unsolicited bids.

“Our No. 1 obligation is to uphold our fiduciary duties,” the executives say. “While some companies undertake this kind of review privately, we chose to make it public to ensure that the process is as robust as possible and the board hears all options from any party that has an interest in our company.”

Also potentially a factor in the openness of the process is the involvement of the United Steelworkers (USW). Cleveland-Cliffs has secured the support of the USW, which as part of its current contract has the right to approve or reject any acquisition of U.S. Steel.

In the meantime, Burritt and Sutherland say the U.S. Steel board has entered into “customary confidentiality agreements with numerous third parties” and is starting to share due diligence information under the agreements.

“While we don’t know how long the process will take, the board of directors, management team and outside advisors are moving quickly to complete it, all while focused on driving maximum value,” the executives conclude in the letter. “Once the review of the strategic alternatives is completed, the board will decide on a path forward for the company that it believes is in the best interest of U.S. Steel stockholders.”

According to a Sept. 20 report from Reuters, U.S. Steel is dissatisfied with Cleveland-Cliffs in part because of the nature of how it went public with the offer.

Municipal/IC&I, Financial

EPA announces historic recycling investment

The U.S. Environmental Protection Agency (EPA) has announced its largest investment in recycling in more than 30 years.

A total investment of more than $105 million will be distributed among individual communities, states and territories, the EPA announced during a Sept. 12 news conference.

“We are proud to select 25 communities and every state and territory in the country to receive grants totaling more than $105 million under the two newly created Solid Waste Infrastructure for Recycling funding opportunities, which you may hear referred to as SWIFR grants,” EPA Deputy Administrator Janet McCabe said.

Grants for the 25 communities will total $73 million and range from $500,000 to $4 million in size.

“Projects that will be supported by this investment include, for example, the purchase of new fleets of recycling collection vehicles and bins to provide curbside recycling services for communities currently lacking access, upgrades to material recovery facilities [MRFs] to reduce contamination, enhancements to composting and organics programs and infrastructure and construction of various types of facilities that improve recycling, composting and reuse infrastructure for materials like plastics and food waste,” McCabe said.

The Bipartisan Infrastructure Law provides $275 million total from fiscal year 2022 to fiscal year 2026 for grants authorized under the Save Our Seas 2.0 Act—the largest investment in recycling in 30 years. The recycling grants are supplemented with additional funding provided through EPA’s annual appropriations, the EPA says in a news release.

States and territories will receive money to help “improve postconsumer materials management programs through developing or updated solid waste management plans and strengthening data collection efforts,” McCabe added.

The EPA says the investment is part of a larger $500 billion investment in private sector manufacturing and clean energy that should help create a manufacturing and innovation boom powered by good paying jobs that don’t require a four-year degree.

EPA Administrator Michael Regan says recycling, along with climate change and drinking water quality, is among the nation’s most pressing environmental priorities.

Metals, Mergers & Acquisitions

Sims to acquire Baltimore Scrap

The Sims Metal business unit of Australia-based Sims Ltd. has agreed to acquire the assets of U.S.-based Baltimore Scrap Corp. (BSC) and its affiliated entities.

BSC is a large Mid-Atlantic metal recycler with 17 facilities in five states—Maryland, Virginia, Pennsylvania, New York and New Jersey. Four of those facilities are home to auto shredding plants, and the company handles and sells approximately 600,000 metric tons of scrap each year.

Sims says BSC’s yards have access to extensive rail, barge and port infrastructure, and the business is well-positioned with attractive proximity to both growing domestic demand markets and export markets.

The acquisition is anticipated to close in October subject to the satisfaction, or waiver, of customary closing conditions, including required regulatory approvals.

Following Sims’ 2021 acquisition of the former Atlantic Recycling Group, based in Maryland, and the purchase of Philadelphia-based Northeast Metal Traders this year, the transaction could face questions concerning the concentration of so many Mid-Atlantic metal recycling facilities in the hands of one operator.

Remaining competitors in the region include U.K.-based EMR Ltd.’s Maryland, New Jersey and Pennsylvania operations, including auto shredding capacity, and a handful of independent operators.

As currently proposed, Sims is making the acquisition for $177 million plus working capital and other adjustments to be determined at closing.

Sims says the deal implies an enterprise value (EV)/earnings before interest, taxes, depreciation and amortization (EBITDA) multiple of 5.4 on a three-year trailing average. On an equivalent postsynergies basis, the EV/EBITDA multiple is forecasted to reduce to 4.2.

“The BSC acquisition is another example of our capital recycling strategy,” Sims Chief Financial Officer Stephen Mikkelsen says. “We anticipate the acquisition to be substantially funded through the redeployment of proceeds from noncore asset sales and other assets that are not likely to achieve their required rate of return.”

Electronics

CalRecycle proposes emergency e-scrap regulations

California’s Department of Resources Recycling and Recovery (CalRecycle) has proposed adopting emergency regulations to maintain the current e-scrap recycling fee for covered electronic devices (CEDs). The proposed regulations would go into effect Jan. 1, 2024, and remain in effect for two years or until revised by the department.

The current rates are as follows:

• $4 for each CED with a screen size of less than 15 inches measured diagonally;
• $5 for each CED with a screen size greater than or equal to 15 inches but less than 35 inches measured diagonally; and
• $6 for each CED with a screen size greater than or equal to 35 inches measured diagonally.

The Covered Electronic Waste (CEW) Recycling Program was established along with the Electronic Waste Recycling Act of 2003 to provide funding for proper end-of-life management of certain video display devices. Consumers of CEDs pay a recycling fee at the time of retail purchase, which funds the program.

CalRecycle says it can assess the adequacy of the covered e-scrap recycling fee no more than once a year to determine whether the program is generating sufficient revenue.

The agency adds that maintaining the current fees will ensure collectors and recyclers are able to continue providing consumers with opportunities to recycle CEDs, which reduces the amount of e-scrap sent to landfills. It says the objective of the proposed regulations is to ensure program funding while not overcharging consumers.

Batteries

ABTC receives $57M grant from Energy Dept.

American Battery Technology Co., a Reno, Nevada-based battery materials company commercializing its primary minerals manufacturing and secondary minerals lithium-ion battery (LIB) recycling technologies, has received its $57 million contract award from the U.S. Department of Energy (DOE) for a multiyear project to design, construct and operate a commercial-scale lithium hydroxide manufacturing facility in Tonopah, Nevada.

The company says the grant contract award marks a milestone in the commercialization of its Tonopah Flats Lithium Project, which is designed to provide commercial-scale quantities of low-cost, low-environmental-impact, domestic critical mineral lithium hydroxide for the U.S.’ clean energy transition.

According to ABTC, the project engages partners including DuPont Water Solutions; the University of Nevada, Reno; and the Argonne National Laboratory to support the commercialization of this new facility for the manufacturing of domestically produced critical battery minerals.

In April, ABTC engaged Overland Park, Kansas-based infrastructure solutions company Black & Veatch for the engineering, procurement and construction of the lithium hydroxide refinery, based on ABTC’s internally developed processing techniques.

The grant was established through the Bipartisan Infrastructure Law, which includes the Battery Material Processing and Component Manufacturing Act, sponsored by Sen. Catherine Cortez-Masto of Nevada.

“I’m proud to support the Nevada businesses and workers who are mining, processing and recycling the critical minerals necessary to grow our clean energy economy,” Cortez-Masto says in a news release.

In line with Nevada Gov. Joe Lombardo’s five-year economic plan, ABTC says its efforts to secure a sustainable, domestic supply of battery-grade lithium hydroxide aim to support the development of local permanent jobs, infrastructure improvements and educational opportunities.

Municipal/IC&I

Cards expands in the Midsouth market with new contract

Cards, a Springdale, Arkansas-based regional waste and recycling company, is accelerating its expansion into the Midsouth market with its receipt of the municipal residential and commercial franchise agreements for the city of Paris, Texas. The five-year contract is worth roughly $11 million, Cards notes in a news release.

The company says the franchise awards allow it to enter new markets and densify its overall service area, stimulating future growth.

“We’ve had our eyes on this market since the city of Anna [Texas] award,” Cards Director of Governmental Affairs Jason Fitzgerald says. The firm began that exclusive contract to provide residential, commercial and industrial trash collection in September 2020.

Fitzgerald says the competition for the Anna contract was “intense,” adding, “With us being the newcomer, winning the constituents’ trust was our primary focus. We are thankful for the opportunity [and] trust and look forward to future municipal RFPs [request for proposals] in the Texas market.”

The company assumes operations Feb. 1, 2024, for the residential franchise and Sept. 1, 2024, for the commercial franchise. Cards will deploy new equipment for curbside collection and business services.

Dustin Reynolds, chief revenue officer at Cards, says new equipment will include commercial dumpsters, 96-gallon carts and residential Curroto-Can front-loaders. However, he adds, “As far as brands, we are sort of at the mercy of who can get them the quickest.”

Currently, the city of Paris hauls its own municipal solid waste but issued the RFP earlier this year to independent haulers because it faced challenges recruiting and retaining adequate staffing levels for its Solid Waste Department, necessitating the daily reassigning of staff from various other departments to staff trash trucks, according to city sources, Cards says.