Packaging giant Smurfit Kappa plans a €1.3 billion stock market flotation in the middle of March. Senior market sources expect the group to have a market capitalisation of some €2.5 billion after an initial public offering (IPO) on the Dublin and London markets.
The group is also likely to pay out a dividend next year in respect of its 2007 performance.
Europe's largest packaging group will embark on an investment roadshow for institutional investors after the publication of its prospectus later this month. Dividend policy will not become clear until the document is published, but informed observers said the group was likely to start making payments next year.
Retail investors are not invited to participate in the flotation, although they will be free to buy shares once the stock is listed.
"The demand environment is positive. The industry supply demand balance is in excellent shape. The pricing environment is positive. The scale, scope and strength of our business today is clear and we have a clear platform for growth," said chief executive Gary McGann.
Smurfit Kappa, formed in late 2005 when Jefferson Smurfit merged with Dutch group Kappa Packaging, is controlled by its management and private equity groups Madison Dearbon, CVC and Cinven. None of its existing shareholders will be selling their shares in the flotation, but they will be free to do so when a 180-day lock-in expires.
Analysts said the group enjoyed a "cleaner structure" than in its previous time on the stock market, which ended when Madison Dearborn took Jefferson Smurfit private in 2002. However, they said the business was "notoriously cyclical" and the presence of private equity groups on the share register could be a drag on the price as they were likely to sell down their interests in the medium term.
The flotation marks the retirement from Smurfit Kappa of its chairman Michael Smurfit, the dominant force behind Jefferson Smurfit for decades. "Industry conditions today are extremely attractive and, I believe, Smurfit Kappa is very well positioned to benefit from those conditions," he said.
Anglo Irish Bank chairman Seán FitzPatrick will become independent non-executive chairman of the group after the flotation. CRH chief Liam O'Mahony and Colombian businessman Nicanor Restrepo will also join the board as non-executive directors. Mr McGann declined to discuss the pricing of the offering or the number of shares to be issued in the flotation. The process is designed to optimise the group's capital structure and pay down some of its €4.88 billion debt pile. The group will refinance some of its existing debt. It has commenced cash tender offers for all its euro-denominated 11.5 per cent senior pay-in-kind notes due in 2015 and a portion of its outstanding senior notes due in 2012.
Chief financial officer Ian Curley said the debt reduction would bring down Smurfit Kappa's annual interest bill by about €125 million, some €75 million of which is in cash with the remainder in non-cash payments.
The flotation plans were made public after the business published financial results for the final three months of 2006.
Revenues in the quarter rose 42 per cent to €1.76 billion, bringing full-year revenues to €7.03 billion. Earnings before interest tax, depreciation and amortisation fell 17 per cent in the quarter to €115 million and the equivalent full-year figure fell 9 per cent to €583 million.
Year-on-year comparisons are not valid as group figures for the fourth quarter and full year of 2005 include Kappa only in December 2005. The net loss in 2006 was €106.14 million.
