Wednesday 25 April 2018

Smurfit brothers poised to net €77m cash windfall from sale of Powerflute

Share-owner Dr Michael Smurfit
Share-owner Dr Michael Smurfit
Michael Cogley

Michael Cogley

Smurfit brothers Michael and Dermot are set for multi-million euro cash windfalls after US private equity giant Madison Dearborn agreed to buy Finnish packaging firm Powerflute for £268m (€314m).

Overall, the brothers will gain £65.58m from the deal. While executive chairman Dermot is directly invested in Powerflute, his brother, Michael, attained shares through his investment vehicle, Bacchantes.

The deal, which will see all shareholders except the Smurfit parties receive 90p (€1.05) per share, comes after a failed attempt by Madison Dearborn last December where the Chicago firm made a bid of £261.5m.

The US firm had already agreed in private negotiations to buy the Smurfit's shares in the company before the offer was made public.

The offer was made by Nordic Packaging and Container Holdings, a Madison subsidiary recently established for the purpose of making the offer for Powerflute.

Between them the Smurfit brothers own around 27.5pc of the firm, amounting to around 82m shares. As part of the deal the brothers stand to receive 80p per share in cash.

Madison's offer represents a premium of around 22pc on the closing price of Powerflute shares on Wednesday, which closed at 73.75p. After failing in a bid to buy the firm late last year Madison re-entered negotiations with Poweflute in April before submitting an indication of interest on May 10.

In the offer Madison said there was a "strong rationale" for making a move for the Finnish packaging firm.

"Powerflute has an attractive market position and a strong management team. However, Madison also believes that certain of Powerflute's near-term operating activities and strategic opportunities could be addressed most effectively as a private company," the company said.

The Poweflute board terminated talks between the two firms just two weeks after the original offer was made after consultation from independent members and shareholders.

The Smurfit brothers were likely to benefit more so from the original offer given they had a larger stake in the company at the time, around 36pc.

This isn't the first time Madison has done business with the Smurfits. In 2002 the investment firm moved for box-maker Jefferson Smurfit before it merged with Kappa Packaging in 2005. Powerflute, which was set up by Dermot Smurfit in 2005, was in a strong position ahead of the deal, doubling its revenue in 2015 thanks in part to the "transformational" acquisition of coreboard-maker Corenso.

Speaking in March, the Powerflute chairman said his company was on the lookout for bolt-on acquisitions. Mr Smurfit also revealed that the original bid failed because of the price offered by Madison.

Powerflute's business is split up into three main units, namely Poweflute, which produces semi0chemical fluting, recently acquired Corenso, and wood supply and procurement company Harvestia.

Irish Independent

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