Chicago group buys Smurfit parent

DUBLIN, Ireland — In a $3.5 billion deal, Chicago-based
private investment firm Madison Dearborn Partners has agreed
to take Irish packaging giant Jefferson Smurfit Group PLC private.

By James P, Miller
Tribune staff reporter

The private equity firm said today that the Dublin company’s directors had agreed to accept
Madison Dearborn’s leveraged buyout bid. In a second element of the transaction, Jefferson
Smurfit Group will distribute to its stockholders the Irish company’s 29.3 percent stake in Chicago
paper-products company Smurfit-Stone Container Corp.

The Jefferson Smurfit deal, which represents Madison Dearborn’s biggest-ever acquisition and
its fifth investment in the paper and packaging industry, "underscores our ongoing commitment" to
the packaging sector, said Madison Dearborn president John Canning.

Canning was the well-known head of the former First Chicago Corp.’s venture capital subsidiary.
He and the rest of the venture-capital staff broke away from the bank in 1993 to found Madison

Madison Dearborn forms limited-partnership investing vehicles, and then invites investors — such
as state pension plans, insurance companies and university endowment funds — to put money
into the funds. The first partnership it formed raised $550 million; the latest, known as Madison
Dearborn Partners IV, raised $4 billion last year.

With the roughly $7.7 billion total raised through its various funds, Madison Dearborn has invested
venture capital in early-stage companies, particularly in the communications industry. It has also
helped numerous publicly traded companies go private through the process known as the
management-led leveraged buyout, or LBO, in such fields as basic industry, health care, and
financial services.

Early in May, Jefferson Smurfit disclosed that it had received an overture from a potential buyer,
but it didn’t identify the suitor. Within weeks, it confirmed that Madison Dearborn was the source
of the buyout interest.

The deal ended six weeks of speculation, so Jefferson Smurfit shares in London and on the New
York Stock Exchange showed little movement following disclosure of the deal. In Big Board
trading, Jefferson Smurfit’s American Depository Receipts rose a modest $1.31, or 4.5 percent,
to close at $30.41.

In announcing the transaction, Madison Dearborn emphasized that the buyout price represents a
38 percent premium to the price of Jefferson Smurfit shares just before the buyout rumors began
pushing the Irish company’s shares higher.

Jefferson Smurfit, now a publicly traded packaging company with global operations, was a small
box-manufacturing company when the Smurfit family acquired it in 1938. Under the leadership of
second-generation CEO Michael Smurfit, the company built itself into an industry powerhouse
through a series of ambitious acquisitions that included heavy borrowing.

Some have paid off handsomely. Some have been less successful: in 1999, Jefferson Smurfit’s
U.S. subsidiary, based in St. Louis, acquired Chicago-based Stone Container Corp. and created
Smurfit-Stone Container, which has been a sluggish performer and a drag on the price of its
parent’s stock. Experts suggest the structure of the new deal is designed in part to resolve that
issue by spinning off the U.S. holding to its stockholders.

Michael Smurfit, who lives in Monaco to avoid tax obligations, will sell his shares to Madison
Dearborn but will remain with the company and will invest a "substantial" portion of the proceeds
he is to receive. Because they make use of so much leverage, successful LBOs can prove
extremely lucrative for the participants.

Copyright © 2002, Chicago Tribune

Posted in:

Sorry, we couldn't find any posts. Please try a different search.

Leave a Comment

You must be logged in to post a comment.