Smurfit-Stone shareholders oppose Rock-Tenn deal

By Reuters
Posted Feb. 3 at 9:39 a.m.

A group of hedge funds that owns a combined 9 percent stake in Smurfit-Stone Container Corp. said it would vote against Rock-Tenn Co.’s $3.5 billion deal to buy the packaging and paper company.

Third Point, Royal Capital Management and Monarch Alternative Capital said in a letter to Smurfit-Stone’s board on Wednesday that the company could go it alone and shareholders would be better off.

“We believe that the acquisition by Rock-Tenn substantially undervalues the company and we are acutely disappointed that the board of directors is willing to throw in the towel on the significant upside inherent in the company’s assets,” the investors wrote in the letter.

“To add insult to injury, it appears that the company did not run a sale process, apparently in violation, or at least in ignorance, of your duties to shareholders to seek the best price available.”

Rock-Tenn said on January 24 that it has agreed to buy bigger rival Smurfit-Stone Container in a cash and stock deal, seven months after Smurfit emerged from bankruptcy. The bid is currently worth $38.12 a share, about 1 percent higher than Smurfit-Stone’s closing share price of $37.72.

The hedge funds said they would support a sale of the company, and encouraged other buyers to come forward.

They said that the Rock-Tenn deal was paying a multiple below historical averages and effectively ignores the value of $500 million to $1.2 billion of losses Smurfit-Stone could use as a tax asset.

In the letter, the shareholders also suggested that Smurfit-Stone Chief Executive Patrick Moore — who had previously announced plans to retire soon — rushed into the deal so he could receive a windfall payment of more than $15 million.

Chicago-based Smurfit-Stone and Moore could not be immediately reached for comment.

Smurfit-Stone, which filed for bankruptcy in January 2009 after a rise in raw materials costs coincided with a drop in demand and tight credit markets, emerged from 17 months of bankruptcy proceedings on June 30 last year after wiping out more than $3 billion of debt.

Lazard advised Smurfit-Stone on the deal, while Wells Fargo Securities was the exclusive financial adviser to Rock-Tenn.

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  1. chris Feb. 3 at 10:18 a.m.

    What are the hedge funds whining about? They could have been some of the shareholders wiped out in the bankruptcy.

  2. jack (me) Feb. 3 at 1:17 pm

    Looks like the hedge fund needs to find 4 times more other blue folk to vote with them.

  3. eric Feb. 3 at 5:48 pm

    I just bought a ($2,299.00 17-inch) MacBook Pro for only $229.62. Think thats a deal? Well let me tell you, my neighbor’s are waiting on a stunning 65″ 3D LED TV, they paid $431.47 and its arriving tomorrow. It feels terrific not paying high street prices While everyone else has to. Now I’m makeing a fortune selling stuff like iPods on to my co-workers, I use two sites, both are good and

  4. John Feb. 8 at 10:49 a.m.

    The comment about rushing in for the $15 million golden parachute is right on the money – no pun intended. Everyone knew he was going to retire and he mandated his puppets to do everything they could by the end of 2010 to make the company more palatable. In the meantime someone might want to take a look at the huge excessive operating, material and freight cost increases already seen in 2011 trying to make up for the shananigans they pulled in 2010.