Smurfit and JS Corp shares rise

Jefferson Smurfit and JS Corp shares have risen strongly on the Dublin and New York markets, after a big rise in the US paper sector and a statement from industry rival Georgia Pacific that higher prices will boost its third-quarter results, writes Brendan McGrath.And further gains may be in prospect for the Smurfit share, after NCB analyst Mr John Conroy upgraded his target for the share price for the second time in the space of a week. Last week, NCB was looking for Smurfit shares to hit 230p, but after the shares closed on 228 1/2p yesterday - a rise of 9 1/2p - the brokers is now expecting the shares to reach 245p.

The strong demand for Smurfit shares in Dublin was matched in New York, where JS Corp - owned 46.5 per cent by Smurfit - rose by almost $1 to $20.68 (£13.97), not far off the share's all-time high.

A review of the JS Corp corporate structure is currently underway, but analysts believe that the rise in the JS Corp share price means that Smurfit is unlikely to buy out Morgan Stanley's 36 per cent stake. This means that a merger of JS Corp with another US packaging group is more likely.

Mr Conroy said yesterday that a buyout at anything close to $19.50 a share, the JS Corp price when his report was completed a week ago, would be of very doubtful value to Smurfit shareholders. With the JS Corp share now trading $1 higher, a buyout of the Morgan Stanley share looks even less likely.

If JS Corp does decide to merge with another US packaging group, NCB believes that a merger partner is likely to be drawn from the ranks of Tenneco, Temple Inland, Union Camp and Stone Container.

The size of these companies suggests that for Smurfit to retain a sizeable associate shareholding of 35 to 40 per cent, it would need to inject fresh equity of around £600 million.