Smurfit Stone, the American packaging group in which Jefferson Smurfit has a 33 per cent stake, has brought its asset disposals since last year's merger to $1.5 billion (€1.4 billion) with the sale of its timber lands in the United States to American paper group Rayonier for $725 million (€678 million).

The sale of the timberlands, which cover 980,000 owned and leased acres in Florida, Georgia and Alabama, had a dramatic effect on the Smurfit group share price.

The shares rose sharply on a belief that Smurfit Stone is now well set to exceed the $2.2 billion in asset disposals and cost savings targeted when Smurfit merged its JS Corp associate with Stone Container last year to form Smurfit Stone.

Smurfit shares rose sharply on the Dublin market and closed up 16 cents to €2.69 (£2.12) - not far short of their highest level this year.

Dealers said the scale of the asset sale and the promise of more to come were the main factors behind yesterday's sharp rise. Smurfit shares were trading $13/4 higher in New York on $281/2.

Smurfit Stone shares were trading more than $1/4 higher on $221/4 as the Irish market closed.

Smurfit Stone chief executive Mr Ray Curran said: "This is without doubt the single most important step in the divestiture process and will significantly reduce our debt and strengthen our balance sheet."

"With the completion of the timberland sale, Smurfit Stone will have raised in excess of $1.5 billion in proceeds from divestitures."

Smurfit Stone began its life last year with debts of almost $6.8 billion, but these debts are understood to have been cut to just more than $6 billion prior to the sale of the timberlands.

Before the timberland sale, Smurfit Stone had raised a total of $494 million from the sale of its minority stake in Canadian paper group Abitibi Consolidated.

The $725 million proceeds of the sale of the timberlands - due to be completed in the fourth quarter - will bring that debt down to around $5.3 billion.

Further cuts in the debt are expected to come when Smurfit Stone sells its newsprint operations in the US.

Analysts believe that the newsprint sales could fetch around $800 million, a sale that would allow Smurfit Stone comfortably meet its targeted $2.2 billion from asset disposals.

The group has also put a rationalisation programme into place which has eliminated 17 per cent of its capacity with the aim of generating $350 million in annual cost savings.