Jefferson Smurfit weighs US bid

Irish-based international paper and packaging giant Jefferson Smurfit Group (JS) has announced that it has received a bid approach from US private equity firm Madison Dearborn Partners.

"Discussions are at a preliminary stage and may or may not lead to an offer being made for part or all of the company,"​ Jefferson Smurfit said in a statement to the stock exchanges in Ireland and the United Kingdom. Shares in Smurfit are listed in Dublin, London and New York.

The Irish company last week announced​ it had received a bid approach, but did not offer details. At the time, market speculation centred around affiliate Smurfit-Stone Container, as well as rivals such as Stora Enso and International Paper.

Smurfit noted that Madison Dearborn is one of the most active private-equity investors in the paper and packaging sectors, and that its objective is to "invest in companies that have outstanding management teams and the potential for significant long-term equity appreciation."​

The statement said Madison Dearborn's bid approach was subject to the continued participation of Smurfit management under any new ownership. As a result, it has formed an independent committee that does not include Smurfit management to advise it on the best course of action for all shareholders.

Smurfit is the world's largest maker of container board and liner board - commonly used in packaging boxes for the food industry - with a 12 per cent global market share, and is the largest container-board producer in the US through its 29 per cent stake in Smurfit-Stone Container. Analysts say the company, including its stake in Smurfit-Stone, is currently worth about €3.8 billion.

While Friday's statement did not discuss what Smurfit intends to do with its stake in Smurfit-Stone, some media reports have suggested the two sides intend to spin this unit off via a special dividend if a deal is done.

Smurfit recently reported first-quarter earnings generally in line with forecasts, and surprised some analysts with its upbeat outlook. The company had profit before exceptional items of €60 million. In the first quarter of 2001, Smurfit earned €82 million. Sales eased seven per cent to €1.08 billion from €1.16 billion.

Chairman and chief executive Michael Smurfit said that business conditions and sentiment had clearly improved by the end of the first quarter. In Europe, he said, the general industry environment is supportive of better prices, which should offset higher input costs.

Smurfit also said the company's forward order book for kraftliner, a type of packaging, is now at its strongest level in five years.