Smurfit Kappa merger target CEO in line for golden parachute of up to €33m

The head of a US merger target of Smurfit Kappa is in line for a potential “golden parachute” award of as much as $36.9 million (€33.4m) as he exits the company after the deal is completed.

Atlanta-based packaging group WestRock’s chief executive David Sewell will leave the company once the $21 billion-plus tie-up goes through next year, the company confirmed after the deal was announced in September. Documents filed earlier this month with the US Securities and Exchange Commission (SEC), ahead of WestRock’s annual general meeting (agm) in January for the financial year to September, highlight the amount Mr Sewell potentially stands to receive for a “good reason termination” following a change of control of the company.

This includes a $9.34 million severance payment, $2.56 million payable under a short-term incentive programme, $34.3 million of stock awards that would vest, as well as health and welfare and outplacement payments.

WestRock’s chief financial officer, Alexander Pease, who is also set to leave the business on completion of the merger, stands to receive a $9.66 million package on his exit, according to the filing.

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However, the final awards, to be published ahead of a special WestRock shareholder meeting on the planned merger, may differ from the figures presented in the recent pre-agm filing, known as an annual proxy statement.

“The disclosure in our 2024 annual proxy statement related to potential payments to Mr Sewell following termination after a change in control event reflects calculations and assumptions as of September 30th, 2023, pursuant to Securities and Exchange Commission rules,” a company spokesman said. “Information regarding specific amounts payable to Mr Sewell or any other named executive officer in connection with the proposed transaction will be presented in the proxy statement/prospectus relating to the special meeting and the transaction, which will be publicly available prior to the stockholder vote.”

The planned tie-up will create Smurfit WestRock, the world’s biggest packaging group with $34 billion of annual revenues. It is essentially a takeover by Smurfit Kappa that will see the group headquartered in Dublin, but will result in its Irish stock market quotation being dropped as it moves its main listing from London to Wall Street. Smurfit Kappa chief executive Tony Smurfit and chief financial officer Ken Bowles are set to run the enlarged group.

A largely share-based deal, expected to be completed in the second quarter of next year, will see Smurfit Kappa shareholders end up with 50.4 per cent of the business.

An activist fund, UK-based Primestone Capital, which owns 0.8 per cent of Smurfit Kappa’s shares, came out last week against the merger, arguing that WestRock’s assets are of “significantly lower quality” with a higher cost base than that of other competitors. Instead, Smurfit Kappa should look again at a combination with International Paper (IP), the Memphis-based company which led an abortive attempt in 2018 to acquire the Irish group. However, few in the market believe that Primestone’s criticism will trigger a rethink by Smurfit Kappa.

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