Smurfit/Rock Tenn Update – 1/31/11

Creditors do well in Smurfit-Stone buyout

In the long run, it looks like everything worked out for the creditors of Smurfit-Stone Container Corp.

Last week, Norcross, Ga.-based RockTenn announced a $3.5 billion agreement to buy Smurfit-Stone to create one of the largest paperboard packaging companies in North America. RockTenn will be paying Smurfit-Stone shareholders a combination of cash and stock valued at $35 per Smurfit-Stone share.

Nearly all of Smurfit-Stone’s shareholders were unsecured creditors after the Chicago-based company emerged from Chapter 11 bankruptcy in June. The company’s reorganization plan called for about 96 percent of its stock to be issued to those creditors. The plan said that the stock would be worth about 71 percent of the unsecured creditors’ claims against the company.

Smurfit-Stone’s stock was valued at $24 a share when trading began in the new stock seven months ago. But if those creditors held on to their shares, the $35 offer from RockTenn would basically make up the difference and make their claims whole.

Of course, Smurfit-Stone’s pre-bankruptcy shareholders still lag behind. The reorganization plan gave only 2.25 percent of the new post-bankruptcy stock to its old shareholders.

The real beneficiary of the merger may be Smurfit-Stone’s employees, which include about 850 people at several facilities in Jacksonville and Fernandina Beach.

Deutsche Bank analyst Mark Wilde said in a research report that the acquisition by RockTenn “does place a stumbling industry giant in the hands of a well-regarded management team.”

“RockTenn has emerged as among the sector’s best managed players, both financially and operationally,” he said.

Apparently, Smurfit-Stone has been looking for a buyout since it emerged from bankruptcy, according to Wilde’s report.

“We believe that Smurfit-Stone has been ‘well-shopped’ over the last several months and see little likelihood of another bid,” he said.

One Response to “Smurfit/Rock Tenn Update – 1/31/11”

  1. Sarah Lolley Says:

    I do hope this is a good thing for the Hodge Mill.

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