JSG sale of unit may net €500m
The company said the Swiss investment bank, UBS has been appointed to lead the talks.
It is not known who made the approach to the company, though market sources said all of the main international competitors to Smurfit are likely to be interested as well as financial buyers.
Jefferson Smurfit, now called JSG Funding, took control of Munksjö in 2002 just months before the Irish company was sold to the American private equity group, Madison Dearborn Partners and the founding Smurfit family.
The €3 billion take out of Smurfit left the paper and packaging group saddled with substantial debts. It has made a number of disposals of non-core businesses since the deal went through in mid 2002.
Smurfit spent considerable time and money getting control of Munksjö. It held a 33% in the firm since 1995 and made a €243m bid for the Stockholm-listed company in late January 2002.
That offer was rejected as undervaluing Munksjö and Smurfit had to come back to the table with a higher bid just before it was approached by Madison Dearborn.
Smurfit Munksjö makes a number of speciality products including toilet paper and kitchen paper rolls.
The rumoured price tag on Munksjö would be a good deal for Smurfit. For 2003, Munksjö had sales of €477m and earnings before interest and tax of just over €37m.
JSG itself had a tough first three months of the year according to its latest results.
The company saw a 2% rise in sales to €1.2 billion but a 9% drop in earnings before interest, tax and depreciation to €142m. At pre-tax level it made a loss of €3m compared to a €6m profit the previous year.
Jefferson said the European paper market was very challenging and that it suffered from excess capacity and weaker currencies.
