Wednesday 22 November 2017

Two private equity giants cut Smurfit stake in half with sale of 10m shares

John Mulligan

John Mulligan

Private equity giants Cinven and CVC have cut their stake in Irish packaging group Smurfit Kappa in half, selling 10 million shares in the company.

An entity controlled by the two firms, Smurfit Kappa Feeder, told the stock exchange yesterday that it has reduced its holding in the Irish firm from above 8pc to just 3.68pc. That involved selling 10 million shares valued at about €80m in Smurfit.

The sale comes just a week after another major shareholder -- private equity group Madison Dearborn Partners -- sold 17.5 million shares in the company for about €140m. That share sale represented half of Madison Dearborn's holding in Smurfit.

Madison has been a long-time investor in Smurfit. It took the packaging firm private in 2002 and Jefferson Smurfit then merged with Dutch packaging group Kappa, in 2005.

Two years after that merger with Kappa, the enlarged group hit the stock market again. At the time, Madison Dearborn owned 21pc and Cinven and CVC owned 23pc of the company between them through the Smurfit Kappa Feeder entity.

Opportunity

The groups have previously sold down parts of their stakes in Smurfit Kappa. With the shares trading at their highest level since April this year, it was most likely an attractive opportunity to make a further exit from the group.

Last week, Smurfit Kappa said it had agreed to pay $340m (€260m) to buy California-headquartered Orange County Container Group (OCCG). It's the group's single biggest acquisition since Jefferson Smurfit merged with Kappa. OCCG has a significant presence in northern Mexico.

Smurfit Kappa already has significant operations in Mexico, spread largely across the central and southern areas of the country.

The acquisition will raise Smurfit Kappa's share of the packaging industry in the country from 12pc to 17pc. It will also boost Smurfit Kappa's non-European exposure from 23pc to 26pc of group EBITDA.

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