Smurfit shareholders approve Madison Dearborn offer

US private equity firm Madison Dearborn has been given the necessary approval by shareholders in Irish packaging company Jefferson Smurfit for its E3.4bn offer for the company. At least 80 per cent of the vote had to be positive for the acquisition to proceed and over 83 per cent of shareholder votes were in favour of the E3.04 per share offer. The offer has now been extended and will remain open until August 20.

Reports last week suggested that Madison Dearborn was pondering whether to proceed with the bid:  the suggestion being that it was increasingly concerned that it had overbid for Smurfit. Given the recent collapse in the public equity markets – which has seen the Dow Jones fall by 30 per cent since the beginning of May – the offer price was beginning to look excessive to some.

A rejection of the deal would also have been detrimental for hedge fund investors. One banker involved in the transaction was quoted last week as saying that merger arbitrage funds held more than 30 per cent of Smurfit. A subsequent fall in Smurfit’s share price resulting from the absence of other interested parties would have seen the share price fall to pre-announcement levels, which at E1.56 is almost 50 per cent lower than the Madison Dearborn offer.

The recommended takeover remains conditional until the spin-off of US subsidiary Smurfit Stone is completed. An extraordinary general meeting in Dublin last week gave its backing to the planned demerger, with 99 per cent of shareholders approving the transaction.

Smurfit has this morning announced first half results for 2002. Pre-tax profit before exceptionals slipped to E146m against the E180m figure reported in the same period for 2001. However Q2 provided more positive news with net sales increasing by 10 per cent to E1.28bn.