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WestRock (WRK) Rises on Concluding SP Fiber Acquisition

Shares of WestRock CompanyWRK gained nearly 2% and closed at $53.01 last Friday, a day after it completed the acquisition of SP Fiber Holdings, Inc for $288.5 million. The acquisition will assist WestRock to meet increasing demand for lighter weight containerboard and kraft paper while broadening its product offering.

SP Fiber produces containerboard and kraft and bag paper for end use in consumer and corrugated packaging from its mills located in Dublin, GA, and Newberg, OR. The acquired mills will balance fiber mix of the mill system of WestRock, which will also take steps to improve the cost structure of both the mills.

The buyout will enhance WestRock's offering of paper solutions for food service, corrugated packaging and other markets. The company expects the acquisition to generate significant synergies and be accretive to earnings in the second half of fiscal 2016.

WestRock, formed by the merger of Rock-Tenn and MeadWestvaco, is the second-largest U.S. packaging company. WestRock has set merger related synergy and performance improvement goal at $1 billion, to be realized in three years. Additionally, the company is attempting to spin off the Specialty Chemicals business into a new company called Ingevity as it is not in line with its business.

Moreover, WestRock has established a shareholder friendly capital allocation strategy to effectively manage the business. The company also expects to generate significant cash flow that will be available for reinvesting in the business, or returning to stockholders.

In a nut shell, WestRock stands to benefit from its investment in capacity, growth, spin off of the non-core Specialty business, shareholder friendly capital allocation strategy and synergies from the merger. However, unfavorable foreign currency translation, weak demand in Merchandising Display and execution risks associated with the merger remain concerns.

WestRock currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry are Fibria Celulose S.A. FBR , Rexam plc REXMY and Wausau Paper Corp. WPP . All these stocks carry a Zacks Rank #2 (Buy).

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REXAM PLC-ADR (REXMY): Free Stock Analysis Report

WAUSAU PAPER CP (WPP): Free Stock Analysis Report

FIBRIA CELULOSE (FBR): Free Stock Analysis Report

WESTROCK CO (WRK): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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