Wednesday 22 November 2017

Smurfit's Powerflute is €350m takeover target

US private equity group Madison Dearborn. Photo: Tim Boyle/Bloomberg News
US private equity group Madison Dearborn. Photo: Tim Boyle/Bloomberg News
John Mulligan

John Mulligan

Madison Dearborn, the US private equity giant that acquired Irish group Smurfit Kappa's predecessor in 2003, has tabled an indicative offer to buy packaging firm Powerflute, which the wider Smurfit family owns over 36pc of.

The proposal values Finland-based Powerflute at less than £255m (€353m).

Powerflute said that Michael Smurfit, a shareholder in the company, is an adviser to Madison Dearborn and would reinvest in the business under a takeover deal, while Dermot Smurfit, Powerflute's chairman, would not.

Dermot Smurfit owns 15.6pc of the company, while Michael Smurfit's Bacchantes investment vehicle owns 21.5pc.

Analysts expect the offer will have to be raised to have a chance of getting the required support.

Madison Dearborn has indicated it would be willing to pay 90p in cash for each share held by AIM-listed 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 Powerfluet achieves earnings before interest, tax, depreciation and amortisation (EBITDA) of €66m in the 12 months to that date.

A portion of Bacchantes' proceeds from the sale to Madison Dearborn would be co-invested in the takeover. "Powerflute has been informed that Dermot Smurfit would not co-invest with Madison Dearborn as part of the proposal," the packaging firm said yesterday.

Releasing a trading update yesterday, Powerflute said that it expects its full-year EBITDA to be between €53m and €55m. That's more than the €50.7m that was forecast by Davy Stockbrokers. Barry Dixon at Davy said Madison Dearborn is likely to have to raise its offer.

Irish Independent

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