Family set to scoop 350m in deal

MADISON Dearborn Partners (MDP) offered only 1.97 per Jefferson Smurfit share when it first approached the paper and packaging company.

MDP made its first approach late last year and held preliminary discussions with the company about a possible offer between November 2001 and February this year.

It was during this period that it indicated an offer of 1.97 per share, excluding spinning-off Smurfit Stone Container Corporation. MDP at that stage had not considered asking the Smurfit management to become part of the bid, the offer document which sent to shareholders claims.

The board of Smurfit did not consider this price to be a fair value and rebuffed the offer.

However, a month later, MDP came back with a 2.05 offer which the company felt was reasonable, and further discussions took place. A month later, Madison were prepared to offer the current price of 2.15, excluding SSCC, as long as the current management become part of the bid process.

While analysts and shareholders may be grumbling that the Smurfit family look set to scoop 350 million from the offer and increase its stake, the document shows that the total value of the deal could have been much lower.

It also reveals that at one stage in 1999, a trade buyer had approached the Smurfits offering only 1.90 per share.

Shareholders, who have until August 6 to accept or reject the offer, might be looking for someone else to come forward that will have to pay up if MDP lose the bid.

According to the offer document, Jefferson Smurfit have agreed to pay for MDP’s expenses relating to the offer up to 1% of its overall bid, which could be worth about 37 million.

While this is standard in large takeovers, it may rankle with shareholders who feel they are being hard-done by.

The most likely source of a counterbid is David Bonderman’s Texas Pacific Group. It is believed to be carrying out due diligence on Smurfit, but may have to come in with a knock-out offer if it is to unseat Smurfit management from the MDP bid.

In the meantime, the offer continues to lose value because of the fall in US stock markets, which has devalued how much shareholders will receive for their SSCC shares. A falling dollar has also hit the price of the bid.