Smurfit deal set to be finalised

- Last updated on GMT

Related tags: Smurfit, Kohlberg kravis roberts, Jefferson smurfit

Jefferson Smurfit has said that the potential second bidder has
withdrawn its offer for the Irish paper and packaging company,
clearing the way for Madison Dearborn Partners to seal its €3.7
billion buy-out.

Jefferson Smurfit has said that the potential second bidder has withdrawn its offer for the Irish paper and packaging company, clearing the way for Madison Dearborn Partners to seal its €3.7 billion buy-out.

Smurfit, which refused to identify the bidder, said: "The party has now informed JSG and its advisers that it does not intend to make a competing offer for JSG."

However, people close to the deal confirmed that the interloper was Texas Pacific Group, a rival US-based private equity firm, and that it had withdrawn after deciding it could not top Madison's price.

"Texas Pacific thought that the price was at a point of indifference which they didn't want to compete on,"​ said one person familiar with the talks.

Smurfit's independent directors, which gave TPG full access to carry out due diligence, also said they had received no other competing bids for the company.

"In a falling market, Smurfit's shareholders are being offered cash on the table and so it is obviously a good deal,"​ one senior executive close to the deal said.

Under Madison's offer, which has been recommended by Smurfit's independent directors, each Jefferson Smurfit share would be worth €3.26, which includes €2.15 cash and €1.11 of Smurfit Stone Container shares, its 28 per cent-owned US associate. Investors would receive one Smurfit Stone share for every 16 Jefferson Smurfit shares.

Last month, Irish investors criticised Smurfit for accepting a takeover bid from Madison, deeming the price too low. But US investors, who hold 55 per cent of the company, have received the offer well. Madison maintains its offer, which it says is final, is at a 38 per cent premium to the price of Smurfit stock before the company said it has received an approach. Smurfit needs the support of 80 per cent of shareholders to close the deal.

Smurfit's existing management, including chairman Michael Smurfit, will have a 10 per cent stake in the merged company and will continue to run it.

Smurfit could realise up to €241 million from the sale of his 74 million shares and is expected to reinvest about a third of the proceeds, leaving him with 6 per cent. Other directors will reinvest up to half their proceeds.

UBS Warburg and IBI Corporate Finance are advising Smurfit's independent directors, while Deutsche Bank and Merrill Lynch are advising Madison Dearborn.

Related topics: Processing & Packaging

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