THE sale by Smurfit Kappa's largest shareholder, Madison Dearborn, of half of its stake in the Irish paper and packaging company -- just two days after it re-entered the US market -- should serve as a warning to other shareholders.
On Monday Smurfit Kappa announced that it was paying €260m cash for the Orange County Container Group. While most of OCCG's businesses are in Mexico, it also has some operations in California and represents Smurfit Kappa's first significant foray into the US market since its predecessor company, Jefferson Smurfit, demerged its US arm, Smurfit-Stone Container, as part of its take-private in October 2002.
Then on Wednesday, Madison Dearborn announced it had offloaded half of its remaining 15 per cent Smurfit Kappa shareholding. It has been a major shareholder in the company since masterminding the take-private of Jefferson Smurfit a decade ago.
So what interpretation can one put on the Madison Dearborn sale? It sold out at approximately €8 a share in a deal that yielded it a gross €140m. While the Smurfit Kappa share price is up almost 50 per cent over the past three months, it is still at only half the €16 level at which the company was refloated in 2007.
By selling out now, is Madison signalling that this is as good as it gets and that it never expects the share price to regain its dizzy post-flotation heights when it briefly hit almost €21 in May 2007?
If it is, maybe Smurfit Kappa's other shareholders should consider following its example -- and sell their shares also.