Smurfit begins US rationalisation

Jefferson Smurfit Group has taken the first step in the rationalisation of its operations in North America, with the sale of the plastic drum division of the Smurfit Packaging Corporation subsidiary for $70 million (£47 million).

The plastic drums company, which has been sold to Russell Stanley Holdings, operates from five locations in the US and had sales last year of $65 million.

Smurfit has made it clear that it intends to concentrate on its core paper and packaging business and this sale is expected to be followed by the sale of the newsprint and forest businesses, as well as the restructuring of Jefferson Smurfit Corporation, in which Smurfit has a 46 per cent interest.

Smurfit's chairman and chief executive, Dr Michael Smurfit, described the sale as "a significant first step in the process of unlocking value for shareholders from certain of the group's non-paper based packaging related operations".

The disposal will result in an exceptional profit of $40 million for the Irish group.

Most of Smurfit's operation in the US are held through J.S. Corporation, and it has been speculated for some months that the newsprint and forestry operations will be sold for upwards of $1.4 billion, with the proceeds being used to buy new packaging assets.

J.S. Corp has been involved in a major strategic review of its operations since May this year. Part of that review involves the rationalisation of the corporation's businesses and concentration on the packaging business. But the review also includes finding a mechanism which would allow the Morgan Stanley Leveraged Equity Fund to sell its 37 per cent stake in J.S. Corp, without Smurfit being required to buy that stake.

Industry sources have also suggested that the strategic review is also looking at the possibility of J.S. Corp merging with another North American packaging group, with Tenneco, Stone Container and Union Camp all being mentioned as possible merger partners.