Irish paper and packaging giant Jefferson Smurfit has accepted a €3.7 billion takeover offer from Madison Dearborn Partners, a US private equity firm, reports the Financial Times.
Each Jefferson Smurfit share will be worth €3.26, which includes €2.15 cash and €1.11 of shares of the US associate Smurfit Stone Container. Investors will receive one Smurfit Stone share for every 16 Jefferson Smurfit shares, claimed the report. The offer is 38 per cent above Jefferson Smurfit's share price the day before it said it received a takeover offer.
There will be no changes to the management, with Michael Smurfit keeping his position as chairman and chief executive and Gary McGann remaining as chief operating officer and chief executive designate.
The executives plan to reinvest some of their proceeds in the new business. The paper reports that the chairman could gain up to €241million from the sale of his 74m shares. Under the terms of the deal, he will reinvest about a third of the proceeds, leaving him with 6 per cent of the company. Other directors will reinvest up to half their proceeds. Altogether, the existing management will own 10 per cent of the merged entity.
The acquisition will be the sixth paper and packaging-related takeover for the Chicago-based group. It is not expected to integrate Jefferson Smurfit with its existing operations, as most of Smurfit's assets are outside the US.
Madison Dearborn said it intended to keep Smurfit's Kildare Golf and Country Club located in Ireland "through 2006", when it will host the Ryder Cup.
Jefferson Smurfit's independent directors were advised by UBS Warburg and IBI Corporate Finance, and Deutsche Bank and Merrill Lynch advised Madison Dearborn.
There have since been reports that private equity groups Texas Pacific and Kohlberg, Kravis Roberts were considering approaching Madison Dearborn with a view to buying some of the equity.