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.

Start your day with The Independent, sign up for daily news emails
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

Recruitment Genius: Evening Administrator

£8 per hour: Recruitment Genius: This Pension Specialist was established early...

Guru Careers: Executive Assistant / PA

£30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life
Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

Election 2015: A dead heat between Mr Bean and Dick Dastardly!

Lord Ashcroft reveals latest polling – and which character voters associate with each leader
Audiences queue up for 'true stories told live' as cult competition The Moth goes global

Cult competition The Moth goes global

The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

Pakistani women come out fighting

Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
Leonora Carrington transcended her stolid background to become an avant garde star

Surreal deal: Leonora Carrington

The artist transcended her stolid background to become an avant garde star
LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

Education: LGBT History Month

Pupils have been discussing topics from Sappho to same-sex marriage
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

Cricket World Cup runs riot to make the event more hit than miss...

The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot