Independent directors back €3.7bn Smurfit bid

Independent directors at the world's largest paper and packaging corporation, Jefferson Smurfit Group, yesterday recommended that shareholders accept a €3.7bn (£2.4bn) bid from the US venture capital group Madison Dearborn for the company.

Independent directors at the world's largest paper and packaging corporation, Jefferson Smurfit Group, yesterday recommended that shareholders accept a €3.7bn (£2.4bn) bid from the US venture capital group Madison Dearborn for the company.

The team of three independent directors at the Dublin-based cardboard empire yesterday unveiled the offer from the Chicago-based investor which would see stockholders receive €3.26 per share. The leveraged buyout offer involves the Smurfit family and the management.

But Irish fund managers were disappointed the offer was not higher. Ivan Murphy, head of Aberdeen Asset Management in Ireland, said: "We won't be rushing to accept."

At a press conference the independent directors also announced the company had received an approach from an unnamed venture capital group in the past four weeks which may lead to a rival bid.

Martin Rafferty, an independent director, said: "To date the board has received only one other approach that remains preliminary in nature ... There is nothing to prevent a higher offer being made ... The independent board is free to consider any other offer it receives." He did not name the bidder but said it was not involved in the paper and packaging industry.

The Madison Dearborn offer will pay Jefferson Smurfit shareholders €2.15 per share as well as paper worth €1.11 in the US group Smurfit Stone Container Corporation (SSCC). Jefferson Smurfit owns 29 per cent of SSCC. The offer is a 10 cent premium to yesterday's closing share price of €3.16 in Dublin.

Michael Smurfit, chairman and chief executive of Jefferson Smurfit, holds a seven per cent stake and other family members also have significant interests. Sources close to the deal said he would become chairman of MDCP Acquisitions, effectively the vehicle being used to take over the group.

The proposed leveraged buyout will strip the Irish stock market of one of its biggest components, but Jefferson Smurfit has long said its shares have failed to reflect the company's intrinsic value. The company said its shareholders were being offered a 38 per cent premium to the market value, excluding Smurfit-Stone, before news of the offer drove the share price up. Smurfit officials said they hoped to complete the sale by mid to late August.

John Canning, the president of Madison Dearborn Partners, said the transaction was the firm's fifth in the paper and packaging industry.

As a maker of cardboard boxes for goods being destocked by US retailers and manufacturers, its US associate Smurfit-Stone has been hit hard by the economic downturn in America. Smurfit has persistently traded at a discount to its peers partly due to its reliance on Smurfit Stone, an affiliate over which it has limited control and from which it receives no cash flow, for nearly half its operational profits.