Prudential Will Assume $2.5B of WestRock (WRK) Pension Obligations

September 8, 2016 4:35 PM EDT

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WestRock Company (NYSE: WRK) announced it will settle $2.5 billion in pension obligations of the WestRock Company Consolidated Pension Plan (“Plan”). This transaction, which is expected to close in late September and is subject to closing conditions, will occur through the purchase of a group annuity contract using Plan assets that will transfer payment responsibility for retirement benefits owed to approximately 35,000 U.S. retirees and their beneficiaries to The Prudential Insurance Company of America, a subsidiary of Prudential Financial, Inc. (NYSE: PRU). This settlement will reduce WestRock’s overall U.S. pension obligations by approximately 40%. The monthly retirement benefit payment amounts currently received by retirees and their beneficiaries are not changing. Those Plan participants not included in the transaction are staying in the Plan.

“WestRock is committed to the long-term financial health of the Plan and has taken steps to protect all participants of the Plan,” said Ward Dickson, WestRock’s chief financial officer. “This transaction represents a further step towards managing future pension cost and risk, benefiting participants remaining in the Plan while entrusting certain retirees’ and their beneficiaries’ pensions to a financially strong and secure institution with expertise in the long-term management of retirement benefits.”

After the annuity purchase, the Plan is expected to remain in a strong, overfunded financial position. WestRock will not make any cash contributions into the Plan to affect this transaction and, at this time, does not expect to make any future cash contributions. Additionally, WestRock does not expect any unfavorable impact to its fiscal 2017 pension income as a result of this transaction.

As part of the transaction, State Street Global Advisors (SSGA), a leading independent fiduciary services firm, was appointed as the independent fiduciary to represent the interests of all Plan participants and beneficiaries and objectively select the safest available annuity pursuant to procedures established by the U.S. Department of Labor. SSGA selected a Prudential contract that provides an additional safeguard by segregating assets in a separate account dedicated to the payment of benefits to Plan retirees and their beneficiaries transferred to Prudential. Key advisors to SSGA included AonHewitt Investment Consulting and K&L Gates LLP.

Key advisors to WestRock included: Mercer as lead strategic advisor, Goldman Sachs Asset Management as Outsourced Chief Investment Officer of the Plan and each of Covington & Burling LLP and Mazursky Constantine LLC as legal counsel.

No action is required on the part of retirees and beneficiaries. Affected retirees and beneficiaries will soon receive detailed information packages.

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