This Week In The Markets

The merger between JS Corp and Stone Container proved to be good news for Jefferson Smurfit when it finally came, with Smurfit ending up with management control of the merged SSCC group while having just 34 per cent of the equity.

Judging by the reaction in the US markets, the opinion seems to be that Stone shareholders are doing very well out of the merger, with their shares now worth double what they were at the beginning of the year.

But the deal is undoubtedly a good one for Smurfit as well. Not only has it led the rationalisation of the US packaging industry, but it has also sorted out the conundrum of the overhanging Morgan Stanley shareholding. However, it has to be said that, at $25 a share, buying out half the Morgan Stanley stake did not come cheap.

The initial euphoria in Dublin after the deal was announced has largely dissipated, with the Smurfit shares now trading at exactly their level before the weekend announcement. Much of the benefits of the merger had already been priced into the stock and it may take more concrete news on the post-merger asset disposal programme to really drive Smurfit ahead over the 300p mark.

With its own balance sheet in solid shape, Smurfit itself is in good shape to bid for some of the European assets of SSCC that are expected to come on the market.

The other main corporate news was full-year results from Bank of Ireland and DCC.

Bank of Ireland's results were bang in line with forecasts, but that did not prevent some hefty profit-taking in the shares from those investors who had bid them up ahead of the results. Many in the market believe that the surge in the bank's share price has been overdone this year and the share may now be back at more appropriate levels.

As regards acquisitions, ICC in Ireland and another building society in Britain seem to be the targets. The problem about buying another building society in Britain is that most of the remaining societies of any size have committed themselves to staying mutual.

The suggestion by the bank that a £500 million war chest is available suggests societies like Skipton and Portman are potential targets, although many in London believe Bank of Ireland could aim for some of the bigger societies like Yorkshire or Britannia. DCC results show that not all industrial holding companies are in the same class as James Crean and Fitzwilton. The DCC figures came in ahead of expectations and the shares traded up sharply to 710p high. Company broker Davy thinks the shares have further to go and, on the basis that DCC should be on a market rating, believes that 780p is an appropriate price.

Speculation on interest rate rises continues to be one of the dominant features of the markets at the moment, and the decision of the US Federal Reserve's Open Markets Committee next week will be awaited with some trepidation.