Madison Dearborn partners, a Chicago-based private equity firm, has reached an agreement to acquire the Jefferson Smurfit group, the global paper and packaging conglomerate based in Ireland, according to a report in Tuesday’s New York Times.
The deal values Jefferson Smurfit at euro 2.4 billion euros. Madison will also assume euro 1.5 billion in debt, which will be restructured as soon as the deal goes through, Sam Mencoff, managing director of Madison Dearborn, told the Times.
The acquisition which had been expected, was formally announced Tuesday by three independent Smurfit directors. The company’s chairman and chief executive, Dr. Michael Smurfit, was not present. He and several other directors recused themselves from any involvement in the negotiations to avoid a conflict of interest, because they are on both sides of the deal; they will reinvest a significant portion of the proceeds from selling their Smurfit shareholdings in Madison Dearborn and will continue to have a role in running the company.
If the offer is approved by shareholders at an emergency general meeting later this summer, it will be the largest transaction in Irish corporate history, surpassing Vodafone Mannesmann’s acquisition of Eircell, the former state cellphone company, in June 2001.
For each Jefferson Smurfit share, investors will receive euro 2.15 in cash and a prorated portion of Jefferson Smurfit’s 29.3 percent stake in Smurfit Stone Container, an American subsidiary, which Madison Dearborn did not want to buy. The Stone Container stock, one share for every 16 Smurfit shares, will be worth about euro 1.1, leading to an overall valuation of euro 3.26 per Jefferson Smurfit share for the Madison Dearborn buyout.
The uncertainty surrounding Smurfit’s minority holding in Stone Container has depressed Smurfit’s share price for years, to the company’s frustration.
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“The market has consistently failed to assign adequate value to Jefferson Smurfit’s holding in Smurfit Stone Container,” said Martin Rafferty, chairman of the committee of independent directors who assessed Madison Dearborn’s bid.
The announcement came after trading had closed for the day on the Dublin and London exchanges. In New York, Jefferson Smurfit American depository receipts gained 4.5 percent, to $30.40; the receipts represent 10 ordinary shares each.
One month ago, when Jefferson Smurfit announced Madison Dearborn’s approach, institutional investors and analysts here said that they expected a deal to be struck at euro 3.50 a share or more.
As it is, the deal represents a 38 percent premium above Jefferson Smurfit’s share price before news of the talks appeared in early May.