Texas Pacific withdraws from bidding leaving Madison Dearborn as sole contender

Texas Pacific has pulled out of the race to acquire Jefferson Smurfit, leaving just Madison Dearborn in the frame.

The US private equity company, which was never formally named as having made an approach, is thought to have withdrawn from the takeover process late on Friday. In a statement yesterday, Smurfit's independent directors said they had been informed that the unnamed body did not intend to make a competing offer for the group.

Chaired by Mr Martin Rafferty, the independent directors have recommended acceptance of the Madison Dearborn bid, which values Smurfit at €3.7 billion. Management at Smurfit have given an irrevocable undertaking to support the buy-out by the Chicago firm.

With the independent directors confirming that no other party has entered the takeover process, the departure of Texas Pacific will bolster the prospect of the Madison Dearborn bid being accepted.

Smurfit's current management team, including its chairman, Dr Michael Smurfit, will stay on if the bid is accepted by shareholders.

Dr Smurfit, who stands down as chief executive later this year, will earn a salary package worth about €16.5 million should the bid be accepted. The sale of his Smurfit shares will realise €159 million although he has agreed to reinvest €55 million in the privatised entity. Additional shares in a part-owned affiliate, Smurfit Stone, will realise about €70 million.

Investors have until August 6th to decide whether to support the plan. With certain Irish fund managers unhappy with the proposal, attention is concentrated on US institutions which hold about 55 per cent of the group. The latest thinking in the Dublin fund management community is not known although US investors are said to have adopted a pragmatic stance.

Shares in Smurfit rose last week amid speculation that Texas Pacific might better the Madison Dearborn offer. But the stock closed at €3.10 on Friday, one cent lower than last Monday. The bid values Smurfit at €3.26 per share.

It is believed that Dr Smurfit had two meetings in recent weeks with Texas Pacific's founding partner, Mr David Bonderman, who is also chairman of budget airline Ryanair. In addition, it is thought the wider management teams at the two organisations had two meetings. Texas Pacific is thought to have concluded that it could not better the Madison Dearborn offer.

The statement said: "The independent directors of Jefferson Smurfit group have previously announced that, in addition to the offer for Jefferson Smurfit from Madison Dearborn Capital Partners Acquisitions I, they had received an approach from an unaffiliated financial party. That party has, over the last month, been provided with relevant information and access to management pursuant to the Irish Takeover Rules. The party has now informed Jefferson Smurfit group and its advisers that it does not intend to make a competing offer."

It added: "The independent directors confirm that no other approaches have been received and they have not been asked to provide any information to any other party interested in making an offer for Jefferson Smurfit group."