The London Stock Exchange (LSE) is poised to lose a £9bn packaging giant to New York in the latest blow to the Square Mile.
Smurfit Kappa, the Irish paper and packaging producer, is in discussions to merge with US rival WestRock, which will result in the company cancelling its premium London listing if a deal is agreed.
The combined group, which is expected to be named Smurfit WestRock, would have its global headquarters in Dublin and would list on the New York Stock Exchange.
A move to New York would come as a further blow to the LSE, which is battling to remain relevant amid a raft of take-private deals and a string of companies moving their listings to the US.
Building materials giant CRH and Paddy Power-owner Flutter have also decided to list in New York in recent months.
British technology darling Arm also snubbed London for its trading debut in favour of the US, deepening concerns about the state of the LSE.
In June, the world’s largest natural soda-ash producer also scrapped its $7.5bn (£5.9bn) London listing.
The City watchdog is consulting on proposals to water down some of its listings rules to make the LSE more attractive.
Julia Hoggett, chief executive of the LSE, previously warned that the City risks falling into a “perpetual cycle” of decline without urgent action to halt the flight of companies abroad.
The LSE has suffered a torrid year, with the number of floats falling by nearly a third between January and June compared to the same period last year, while proceeds raised remained flat at £593m, according to a report by EY.
The proposed tie-up between Smurfit Kappa and WestRock would create a global packaging giant valued at nearly $20bn.
Financial terms of the deal were not disclosed, but Smurfit Kappa said definitive terms would be set out in a further announcement.
The Irish company was boosted by a surge in demand for packaged goods and e-commerce during Covid lockdowns.
However, last month it posted a fall in first-half core profit as it struggled to offset a decline in volumes.
Analysts at Credit Suisse said the proposed deal made sense given the strength of Smurfit Kappa’s presence in the Americas, adding that the tie-up would be “a good cultural fit”.
Smurfit Kappa is headquartered in Dublin and employs around 47,000 staff globally.
The company said that any deal would be subject to shareholder approval, due diligence and regulatory approval.
In an effort to boost the beleaguered market, the Financial Conduct Authority (FCA) has consulted on proposals to water down some of London’s listings rules.
The regulator has proposed to replace the current premium and standard system with a “single segment” regime with less onerous rules.
At present, only companies with a premium listing are eligible to be included in the FTSE indexes – which are influential, because they are tracked by passive funds. It means that scrapping the current regime would mark one of the most significant overhauls of London’s stock market rules since the 1980s.
However, the proposals have faced criticism from pension chiefs, who recently warned the City watchdog against watering down its rulebook, claiming that the proposed reforms would strip back protections for shareholders and damage the UK’s reputation.
Xavier Rolet, who led the LSE between 2009 and 2017, previously told The Telegraph that government and regulatory efforts to make London a more competitive financial centre were a “sideshow of a sideshow” and a “complete waste of time”.
Only 18 listings took place on the LSE during the first six months of the year, down from 26 last year.
The combined group would retain a secondary listing on the LSE if the deal is agreed.