Smurfit plans merger with Stone Container

IRISH-BASED Jefferson Smurfit yesterday triggered a major rationalisation in the paperboard and packaging industries. Jefferson Smurfit Group (JSG) will merge its 46 per cent-owned US subsidiary Jefferson Smurfit Corporation (JSC) with the loss-making Chicago-based Stone Container Corporation to form Smurfit-Stone Container Corporation, a listed US company with a market capitalisation of $4.3bn (pounds 2.6bn), in which Jefferson Smurfit will own a 34 per cent stake.

The combined company would create one of the world's largest manufacturers of paperboard and paper-based packaging products, with annual sales of around $8bn and operations in the US and Europe, the chairman and CEO of JSG, Michael Smurfit, said yesterday. Dr Smurfit will become non-executive chairman of the new company, Roger Stone will be chief executive officer, while JSC will provide the deputy chief executive and chief financial officer.

It also starts life with massive combined debts of $6.4bn. After shouldering heavy interest charges of $650m, JSC barely broke even and Stone Container lost $593m last year. The merger will create operational savings of $350m a year. The group also intended to sell $2.5bn worth of assets, including the Canadian newsprint and pulp mills, within the next 18 months, Mr Smurfit said yesterday. He expects to realise assets at a reasonable price, on the grounds that the depressed market in paper and packaging industries caused by the creation of excess capacity has ended and the value of assets is beginning to rise.

The newly merged company made a good strategic fit, and was expected to be "earnings-accretive and cash-flow positive" in 1999, the company's statement said. The North American container board operations of JSC and Stone are complementary, and the merged company has substantial manufacturing capacity in Germany and Belgium where JSG is weak, and is less important in France and Spain, where JSG has substantial operations.

The deal will focus the business on packaging materials, its core competence, the company said yesterday. Together, JSG and the new company will be the market leader in North America, Latin America, and Europe, with 11 per cent of global container board sales.

As part of the deal Jefferson Smurfit will buy in 20 million shares in its subsidiary from a leveraged fund for $500m, at an average price of $25 a share, a substantial premium to the market price, reducing the fund's stake from 30 per cent of JSC to 9 per cent in the enlarged company. Existing investors in JSC and Stone Container will hold roughly equal stakes in the remaining 57 per cent of the enlarged company.

Shares in Jefferson Smurfit Corporation rose $3 to $22 yesterday, Stone Container sharesclimbed $1 to $21 and Jefferson Smurfit Group shares in London also rose 14.5p to a new peak of 238.5p.

peopleFrankie Boyle responds to referendum result in characteristically offensive style
Lewis Hamilton will start the Singapore Grand Prix from pole, with Nico Rosberg second and Daniel Ricciardo third
F1... for floodlit Singapore Grand Prix
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvHe is only remaining member of original cast
Arts and Entertainment
tvHighs and lows of the cast's careers since 2004
Fans hold up a scarf at West Ham vs Liverpool
footballAfter Arsenal's clear victory, focus turns to West Ham vs Liverpool
New Articles
i100... she's just started school
ebooksAn unforgettable anthology of contemporary reportage
New Articles
Life and Style
Couples have been having sex less in 2014, according to a new survey
Arts and Entertainment
musicBiographer Hunter Davies has collected nearly a hundred original manuscripts
New Articles
i100... despite rising prices
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam