Is the cardboard box king ready to wrap up his empire?

Business Profile: The legendary Irish millionaire Michael Smurfit and his family may be about to relinquish control of a 4bn euro business
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The Independent Online

"Equity is blood," Michael Smurfit once remarked. The phrase summed up his attitude to his family company. Jefferson Smurfit, the world's biggest paper and packaging group, has always been in the firm grasp of one of Ireland's most glamorous dynasties. But last week it appeared that could change. The group stunned the stock market as it emerged it was discussing a deal which could lead to a takeover of the company by a Chicago-based venture capital firm.

In Ireland, where the cardboard empire is based, Michael Smurfit's lifestyle has become legendary. The 65-year-old surrounds himself with all the trappings of wealth imaginable. He drinks Chateau Petrus, one of the top five wines in the world. His 165ft Italian-built yacht cost $30m (£20m) and eats up $2m every year. He has his own art collection of paintings by the famous Irish artist Jack B Yeats. There is sponsorship of the Smurfit Champion Hurdle at the Cheltenham festival. His company owns the Kildare House & Country Club, which will host the Ryder Cup in 2005. The family has celebrity cachet too. Michael's niece, the actress Victoria Smurfit, stars in About a Boy with Hugh Grant.

Michael Smurfit spends much of his time in Monte Carlo for tax reasons, where he is Honorary Consul. At different times he has had homes in Los Angeles, San Tropez, New York, Miami, Mexico, Paris and London.

Critics consider him proud and arrogant because of his high-handed performances at Jefferson Smurfit annual general meetings. Even institutional shareholders have attacked him for this massive pay package, which was reduced from €6.4m (£4m) to €4.7m this year following intense criticism. But he is still the best-paid executive in the country. In one interview he said: "It's not enough. I am paid what I am paid. I have a salary, I have a bonus scheme and so on, vetted by the shareholders and approved independently by the board, and I have a long-term incentive plan and various things. Nothing is untoward. I've made very, very large sums out of this business. But I've made very large sums for the business."

His 6.8 per cent stake in Jefferson Smurfit is worth €260m. But he toiled from the age of 16 in the paper industry to enjoy the champagne lifestyle. Once he admitted that his determination in his career wrecked his two marriages, the first to Norma Treisman and the second to a Swedish air hostess, Brigitta Beimark.

Michael Smurfit was born in Lancashire in 1936. His father, Jefferson Smurfit, was a tailor from Sunderland, and his mother, Rosie, was from Belfast. The family returned to Ireland in 1945 and Michael, the eldest of seven, was sent to the upmarket Jesuit-run school Clongowes Wood College.

As a youngster he suffered from poor health, which shaped his outlook on life. "I was ill for a number of years. As a teenager I spent a lot of time in hospitals, weighed 15 stone, had three chins and a belly out to here. Of course it affected my life." When Michael was still at school his father pulled him out of education and planted him in the world of work, telling the teenager: "You can buy brains but not businessmen."

Jefferson Smurfit's cardboard box manufacturing business, which he named after himself, had a plant in England, and Michael was sent to work on the factory floor. He later married Norma and the couple lived in a modest semi-detached home in St Helens. She drove a Mini. They moved to Dublin and Michael became the driving force behind the expansion of the company. After a stock exchange listing in 1964 he began to acquire undervalued companies in Britain and the US, turning them around and greatly increasing their worth. In 1986 he swooped on Container Corporation of America, giving the group a presence in South America and Europe.

Michael Smurfit was a shining success in the Ireland of the 1980s, when unemployment was almost 20 per cent, drug problems abounded and the Northern Ireland nightmare was at its most bloody.

The government asked him to turn around Ireland's ailing state-owned phone company, Telecom Eireann. He made the operation profitable. But his success turned sour when a controversial property deal for Telecom Eireann's new headquarters resulted in the then prime minister, Charlie Haughey, suggesting that Mr Smurfit should step aside as chairman. The sacking was made all the worse as Mr Haughey made the comments on national radio while Mr Smurfit was enjoying a game of golf. Subsequently Mr Smurfit was cleared of any wrongdoing.

Mr Smurfit crossed swords with the former prime minister again last year. The businessman made a surprise appearance at Ireland's anti-sleaze tribunal to reveal that Mr Haughey had solicited £60,000 from him, although the former prime minister denied doing so.

Jefferson Smurfit's boardroom is populated with family members. Michael's brothers Dermot and Alan are directors, as is his son Tony. In recent years its shares have stagnated, but the company has made a commitment to deliver value for shareholders. Last Thursday's announcement of a possible takeover of the group took analysts by surprise. The negotiations involve the venture capital group Madison Dearborn Partners, and the Smurfits are planning to stay with the business after the deal.

In an interview with The Irish Independent four years ago, Tony expressed the desire to follow in his father's footsteps and become chief executive. Michael is due to stand down as chief executive in October, but will remain as non-executive chairman. If this was a normal takeover the family would be expected to exit the company as soon as the new owner took control. As a result, there has been speculation in recent days that the Smurfit family and other management could be behind the deal in some form. Michael Smurfit some years ago said: "I think my greatest joy will be to see my sons and daughters in the business. It is one of the compensatory values on reaching middle age."

Buying Jefferson Smurfit would be a gargantuan deal. Analysts expect the final price tag to be just under €4bn. If the takeover was entirely financed by debt it would create an interest bill of €270m a year for the new owner. But Jefferson Smurfit's operating profit is only €300m, which would seem to rule out the possibility of the deal being financed by borrowings alone.

The group owns 29 per cent of Smurfit Stone Container Corporation (SSCC) in the US. Under the proposed deal shareholders would be paid cash for the Jefferson Smurfit shares and they would receive stock in SSCC. If it emerges that the Smurfit family are bought out, Tony would receive €3.4m, Dermot €22.5m and Alan €18.1m.

Analysts believe Jefferson Smurfit may be about to turn a corner as the paper and packaging industry is emerging from a downturn. The group also looks cheap when measured against its peers. Michael Smurfit may simply feel it is time to take the company off the market. Because, for him, cardboard has always been a family affair and blood is thicker than water.

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