Smurfit to retire as firm returns to market

After decades in the control of Dr Michael Smurfit, it will fall to Seán FitzPatrick of Anglo Irish Bank to chair the Smurfit empire when it returns to the market in March.

Mr FitzPatrick is the darling of the Dublin business world, but the ambitious flotation timetable doesn't leave much room for manoeuvre.

The combination of Jefferson Smurfit with Kappa Packaging 15 months ago created a player with 23 per cent of the European container-board market and 24 per cent of the corrugated market. The group has been a major participant in industry-wide rationalisation, in which some two million tonnes of capacity was closed down. In a business prone to testing price pressures, this has restored some pricing power to big players such as Smurfit.

"The attraction of the company is that it's well managed in a difficult industry. Compared to the company it was prior to the take-private four years ago, it's got a cleaner corporate structure - ie no significant associate shareholders, full control of cash flows and a more focused product profile," said Merrion Capital analyst John Mattimoe.

Even though the flotation will raise some €1.3 billion to reduce the group's €4.88 billion debt pile, Mr Mattimoe said the business would remain highly leveraged. "There there will be a degree of financial risk as well as cyclical risk. There will be some investor concerns over the longer-term intentions of the venture capital shareholders."

Still, the years of private-equity ownership mean that the governance issues that were a feature in the past will not be of concern to investors. The roles of chairman and chief executive are no longer combined as they were under Dr Smurfit's leadership. Investor concerns about remuneration are also unlikely.

"As with all flotations, it will come down to price. Smurfit today . . . has a cleaner structure and less of the associates," said another analyst.

While chief executive Gary McGann wouldn't discuss the pricing of the issue yesterday, his intentions are not in any doubt. The group has chosen to go to the market while the going is good.

Even if the 180-day lock-in of current shareholders depresses the share price, the fact that CVC, Cinven and Madison Dearborn are not selling out suggests they believe the going will remain good for some time.