Major shareholder critical of Smurfit Kappa sells down stake

Janus Henderson cuts holdings in cardboard box maker from 3.9% to below 3% threshold

A major shareholder that was a thorn in the side of Smurfit Kappa's management earlier this year as the cardboard box maker refused to engage with would-be suitor International Paper (IP) has sold down its stake as the stock hovers close to record highs.

London-based Janus Henderson, which publicly indicated in May that it could mount a shareholder revolt seeking the removal of Smurfit Kappa directors as the company rejected overtures from IP, cut its stake last week from 3.9 per cent to below the 3 per cent threshold at which investors must disclose their holdings under stock market rules.

The move, revealed in a stock market filing this week, comes as Smurfit Kappa’s stock reached as high as €36.76 a piece on three occasions last week – some 12 cent above its record closing price, reached in April, when IP was in hot pursuit of a takeover.

While the shares sold off in June as it became clear that IP was abandoning its €9 billion cash-and-stock proposal, sentiment has subsequently been boosted as investors focused on Smurfit Kappa’s own growth plans and a strong set of interim earnings, reported late last month.


Four-year plan

Credit Suisse, a corporate broker to Smurfit Kappa, last week reinstated coverage of the stock after a period of restriction, with a price target of €43.70. Lars Kjellberg, an analyst with the Swiss investment bank, said Smurfit Kappa's €1.6 billion, four-year investment plan – outlined by group chief executive Tony Smurfit before IP made its initial overture in February – means it has "entered a new chapter that we believe should further enhance the attractiveness of the shares".

Mr Kjellberg said Europe’s largest paper-based packaging group would be able to deliver an average of 12.6 per cent compound annual growth in earnings between 2017 and 2020 as it benefits from investment, strong global economic growth and a surge in ecommerce that is boosting demand for cardboard packaging.

However, the Janus Henderson stake sell-down comes at a time when some investors believe that Smurfit Kappa shares are reflecting an optimistic outlook just as clouds gather on the horizon for the global economy. The stock is currently priced about 28 per cent above where it was changing hands at just before news of the first IP approach was first disclosed five months ago.

Takeover speculation

Market sources have said that Smurfit Kappa’s reluctance to date to set out additional medium-term guidance and targets to those outlined in February, particularly in light of how strongly the board had rebuffed IP, has disappointed some investors.

They added that Smurfit Kappa’s shares may also be continuing to reflect an element of lingering takeover speculation. IP has been subject since early June to a 12-month ban from making another approach, after failing to make a formal offer ahead of a “put up or shut up” deadline that had been set by the Irish Takeover Panel.

Spokesmen for Janus Henderson, which had been one of Smurfit Kappa’s three largest shareholders, and the packaging company declined to comment.

Shares in Smurfit Kappa closed 0.8 per cent lower at €36.32 on Tuesday, giving the group a market value of €8.62 billion.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times