Irish-founded packaging company Powerflute up on takeover approach

Shares in Irish-founded packaging company, Powerflute jumped by nearly 2% at one point yesterday following an indicative takeover approach from US private equity house, Madison Dearborn Partners.

The Dermot Smurfit Snr-founded packaging firm, which is based in Finland but has its shares listed on London’s AIM index, yesterday announced it had received the preliminary proposal and that it was being considered.

The proposed offer is 90p in cash for the shares not held by Mr Smurfit — who is also the chairman of Powerflute — or Bacchantes, which is the investment vehicle controlled by his brother Michael Smurfit.

Bacchantes currently holds a 21.5% stake, with Dermot Smurfit controlling 15.6%.

Madison Dearborn is also proposing to pay 76p (with a possible 6p earn-out) for the shares owned by Mr Smurfit and Bacchantes.

However, Barry Dixon of Davy Stockbrokers suggested Madison will have to upwardly revise its numbers if it formally bids; basing his reasoning on Powerflute’s earnings forecasts and share price trajectory.

The firm’s shares are up over 90% this year so far [currently trading at around 91p], making it the best performer in the European packaging sector.

“This valuation looks cheap relative to the sector and to our price target of 100p. The indicative bid, therefore, may have to be revised upwards,” Mr Dixon said.

Separately, Powerflute issued a positive trading update, yesterday, saying it has performed strongly during the second half of the year with progress evident in Europe, the US and China.

Earlier this year, the company said it expected its 2015 figures to be ahead of expectations and yesterday said EBITDA should come in at between €53m and €55m.

It suggested that market conditions for packaging papers has softened slightly since earlier in the year, but “continue to compare favourably with prior periods”.

While Powerflute also said that its outlook for 2016 remains positive, it noted that its 2015 results will be affected by non-recurring items related to last year’s €81m acquistion of international cardboard manufacturer, Corenso, and its integration into the group.