Smurfit offload paper business in €450m deal

PAPER and packaging group, Jefferson Smurfit has agreed to a €450 million deal to offload its Munksjo specialist paper business in Sweden.

The company said yesterday it had agreed terms with the EQT III Fund, a Scandinavian private equity group, but that the deal remained subject to the usual regulatory approvals. The proceeds from the disposal will be used to pay back part of Smurfit’s hefty debt pile.

The winning bid beat off competition from two rival private equity groups, Electra Partners Europe and a consortium involving CVC and Nordic Capital. Munksjo’s business comprises pulp, décor paper and specialist paper and is expected to generate sales of approximately €480 million this year. Smurfit will retain small parts of the business located in Norway, Sweden and Poland, which concentrate on containerboard and corrugated paper.

Munksjo was acquired by Smurfit for €243 million in 2002, the same year in which Smurfit itself was swallowed up in a €3.7 billion takeover by the Madison Dearborn private equity group. The Madison deal was highly leveraged and involved Smurfit taking on significantly more debt as a result.

Smurfit chief executive, Gary McGann, said earlier this year that the company would look at selling off non-core businesses as part of a programme to reduce debt.

The company reported a 95% fall in pre-tax profit the following year, attributed to interest charges on its leveraged capital structure.

Global investment banking giants UBS and JP Morgan advised Smurfit on the sale. Smurfit, which employs in the region of 30,000 people, also recently concluded the sale of Munksjo’s tissue business to a Swedish company for €28 million.

Munksjo chief executive Per Rodert said: “We are enthusiastic about working with EQT in building and developing Munksjo’s position as a leader in the decor and specialty paper markets. EQT’s financial resources and experience of driving industrial acceleration, coupled with Munksjo’s strong market position, will improve our potential to expand the business further, organically and through acquisitions.”