WestRock to Settle $2.5B Pension Obligations to Manage Cost
WestRock Company WRK said that it will settle $2.5 billion in pension obligations of the WestRock Company Consolidated Pension Plan. The transaction will help in managing future pension cost and risk of the company.
Notably, the transaction will occur through the purchase of a group annuity contract using plan assets. Per the deal, WestRock will transfer payment responsibility for retirement benefits owed to roughly 35,000 U.S. retirees and their beneficiaries to The Prudential Insurance Company of America, a subsidiary of Prudential Financial, Inc. PRU.
The settlement will reduce WestRock’s overall U.S. pension obligations by around 40%. The monthly retirement benefit payment amounts currently received by retirees and their beneficiaries will not change. Those plan participants not included in the settlement transaction are staying in the plan.
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The transaction will benefit participants remaining in the plan while entrusting certain retirees’ and their beneficiaries’ pensions to a financially strong and secure institution. Following the annuity purchase, the plan is expected to remain in a strong, overfunded financial position. The company noted that the affected retirees and beneficiaries will soon get detailed information packages.
WestRock will not make any cash contributions to the plan. The transaction is anticipated to close in late September, subject to closing conditions. The company does not expect any unfavorable impact to its fiscal 2017 pension income as a result of this settlement.
WestRock’s advisors for the transaction include Mercer as lead strategic advisor, Goldman Sachs Asset Management as Outsourced Chief Investment Officer of the plan and Covington & Burling LLP and Mazursky Constantine LLC as legal counsel.
WestRock currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the industry include UPM-Kymmene Oyj UPMKY and Domtar Corporation UFS, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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