Business Irish

Monday 24 October 2016

Smurfit firm halts €350m buy discussion

Published 22/12/2015 | 02:30

Michael Smurfit
Michael Smurfit

Less than two weeks after the takeover approach was first revealed, the board of Smurfit-backed packaging group Powerflute has terminated talks with US private equity group Madison Dearborn that valued the business at about €353m.

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Listed on London's Alternative Investment Market, but based in Finland, Powerflute is 36pc-owned by the Smurfit family. Its executive chairman, Dermot Smurfit, owns 15.6pc of the company while an investment vehicle controlled by his brother, Michael Smurfit, owns 21.5pc.

Michael Smurfit had been working as a consultant to Madison Dearborn and his Bacchantes vehicle was set to back the bid and reinvest in the Powerflute business as part of a takeover. Dermot Smurfit would not have reinvested, however.

But the Powerflute board has now ended discussions with Madison Dearborn, which itself was a backer of a €3.7bn take-private of packaging group Smurfit Kappa's predecessor, Jefferson Smurfit, in 2003. Madison Dearborn had exited that investment entirely by late 2012. Michael Smurfit was once chairman and chief executive of Jefferson Smurfit, while Dermot Smurfit was once its deputy chairman of the group.

"Following evaluation of the proposal by the independent members of the board of directors of Powerflute and consultations with certain major shareholders of Powerflute, the board of Powerflute has terminated discussions with Madison Dearborn," a statement from the Finnish company yesterday said.

The senior independent non-executive director at Powerflute is Christopher Knight, an investment banker who previously worked with firms including Morgan Grenfell and Deutsche Bank.

Chicago-based Madison Dearborn had indicated it would be willing to pay 90p in cash for each share held by Powerflute shareholders, other than those owned by Dermot Smurfit and Bacchantes.

The private equity group said it would pay 79p for each Powerflute share held by Dermot Smurfit and Bacchantes, plus a contingent value right of 6p per share held by them, payable 18 months after completion of a takeover and provided Powerflute had achieved earnings before interest, tax, depreciation and amortisation (EBITDA) of €66m in the 12 months to that date.

Powerflute predicted earlier this month that its full-year EBITDA for the current financial year will be between €53m and €55m. That's more than was anticipated by analysts.

Shares in Powerflute remained steady at 90p yesterday in London.

"Despite the termination of the deal, we still believe the stock is worth over 100p per share," said analyst Barry Dixon at Davy Stockbrokers.

Irish Independent

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