Smurfit Stone, the packaging company that emerged last year from the merger of Jefferson Smurfit Corporation with Stone Container, has begun its programme of asset disposals with the sale of a 3.75 per cent stake in the Canadian newsprint group Abitibi Consolidated for $80 million (#69 million). The sale of the 7.8 million shares at $10.25 each means that Smurfit Stone's stake in Abitibi has fallen to 21.5 per cent. The group intends to sell the remaining Abitibi shares but this is likely to be done in phases - the remaining 40 million shares are worth more than $360 million at the current price in the market.
Smurfit Stone was fortunate in that it managed to find a single institutional buyer for the Abitibi shares who was prepared to pay well in excess of the market price for the 3.75 per cent stake. Before the sale, Abitibi had been trading at just over $9, compared to the $10.25 that Smurfit Stone obtained for its shares.
This first asset sale follows the announcement by Smurfit Stone last year that it intended to eliminate 17 per cent of its containerboard capacity and generate annual cost savings of $350 million. The asset disposals programme - which runs in tandem with the restructuring - is aimed at realising $2 billion and making a sizeable dent in the group $6.8 billion debt burden.
Apart from the remaining Abitibi shares, Smurfit Stone is expected to sell its newsprint and timberland operations, although industry sources believe that these are unlikely to be sold until the market for newsprint and timber improves.
Smurfit Stone got another boost yesterday after Union Camp gave an upbeat commentary on trading prospects for 1999. Although Union Camp's fourth-quarter results were below market expectations, the New Jersey packaging group said that it was well positioned for "improving market conditions in 1999".
Union Camp has also followed Smurfit Stone and Georgia Pacific with a price rise for its linerboard products. It remains to be seen whether this pricing move by the three big linerboard producers from February 1st will be successful but the indications are that a price rise will hold at least from next April.
(# - Euro)
