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Smurfit under offer in US deal

The Irish family that started a box company in 1938 then turned its surname into the globally renowned packaging and paper brand Smurfit has accepted an offer of £2bn (€3.7bn) – the largest in Irish corporate history – to sell to a US venture capital company.

It will mean the end of an era as a public limited company if shareholders accept the pre-conditional offer of €3.26 for each Jefferson Smurfit Group share by private equity firm Madison Dearborn Partners, based in Chicago. This includes €2.15 cash and e1.11 of spin-off shares for Smurfit Stone Container Corporation, its 29% owned US associate. The offer represents a 38% premium over share prices the day before the approach was made in May.

MDP, keen to expand into Europe, is one of the largest US investors in paper and pack-aging companies which include Packaging Corporation of America and Paper Ex-change.Com.

Under the offer, the JSG senior management team will remain and will be required to invest a ‘significant proportion of their net cash proceeds’ into the business that will retain the Smurfit name. Chairman and CEO Dr Michael Smurfit is set to make £156M (€241M) while keeping a 6% interest.

Acceptance comes during a particularly bumpy ride on the stock exchange. Earnings per ordinary Smurfit share de-creased by 31% to 15.5 in 2001 compared to 22.4 in 2000, with sales taking a 1% dip. SSCC was also hit by a fall in profits affected by the current downturn in the US corrugated market. Smurfit has undertaken cost-cutting exercises since 2000.

The decision to sell to a US venture company over a European rival is conspicuous. Tom Godfrey director of IBI Corporate Finance, one of Smurfit’s advisors on the deal, said MDP made an unsolicited approach to the company which had been exploring different avenues over two years. This included an offer in 1999 by an unaffiliated non-financial third party to merge with Smurfit for €1.90 a share. The only approach since the MDP offer has been by another private equity company.

If the deal goes ahead, MDP says no major operational changes are expected, although, it is understood that JSG and SSCC are in talks over the exchange or purchase and sale between them of certain assets. in Europe and Canada.

A decision on the offer is expected by the end of August.