Smurfit’s FTSE 100 aim on hold after UK indices rejig

Tony Smurfit-led paper packaging group to join FTSE 250 this month

Smurfit Kappa chief executive Tony Smurfit. Photograph: Brenda Fitzsimons

Smurfit Kappa chief executive Tony Smurfit. Photograph: Brenda Fitzsimons

 

Smurfit Kappa must put its ambitions to become the fifth Irish company on the prestigious FTSE 100 index in London on hold, after a rejig of the index was announced on Wednesday.

Confirming analysts’ expectations, stock market index provider FTSE Russell said Smurfit Kappa would join its UK series on June 20th by being included in the FTSE 250 index.

Smurfit Kappa, led by chief executive officer Tony Smurfit, was beaten by pharmaceutical group Hikma for inclusion in the FTSE 100, as British satellite communications group Inmarsat was relegated automatically after its market value slumped in the wake of weak quarterly results and a sales warning last month.

Smurfit Kappa has been included in its six-company reserve list for the FTSE.

“The big benefit is from joining the FTSE UK series, irrespective of which of the two main indices it was being included in,” said David O’Brien, an analyst with Goodbody Stockbrokers. “I expect to see sizeable buying of the stock in the next few weeks on the back of this announcement.”

Passive funds that track the FTSE 250 index will be forced buyers of the company’s stock.

Last month, Smurfit Kappa moved its Irish exchange listing to a secondary one as it upgraded its UK listing to a premium one to pave the way for its entry to the FTSE indices.

While former chief executive Gary McGann ruled out seeking inclusion in the series two years ago unless the company was big enough to join the FTSE 100, it is understood the current management team is more relaxed about joining the less keenly followed index in a strong position.

One of the main problems with being one of the smaller companies on the FTSE 100 is that it can leave it subject to constant relegation speculation. Jordanian-based Hikma was pushed out of the index in March after a year.

The FTSE 100 is currently home to Irish-headquartered CRH, Paddy Power Betfair, Shire and DCC.

Mr O’Brien said Smurfit’s inclusion in the FTSE UK series “will allow investors to draw closer comparisons to rivals Mondi and DS Smith and not Smurfit more attractive valuation.” Mondi is on the FTSE 100. DS Smith is on the FTSE.