The Madison Dearborn bid for Jefferson Smurfit is believed increasingly likely to value the packaging group at about €3.20 per share. A formal offer is expected soon, but not before the weekend.
Such a rate exceeds yesterday's closing price of €3.15 but would be at the lower end of the €3.20 to €3.30 range mooted. It is thought that this reflects the absence of synergies that could be derived from a trade sale to a rival operator in the industry as distinct from a sale to a private equity group such as Madison Dearborn.
Still, it is unclear if the institutional investors would support a bid at such a price.
Certain large shareholders have indicated that they would not support a leveraged buy-out at €3.50 per share. No alternative approach has yet emerged, it is believed.
If the Madison Dearborn approach was rejected in the absence of a rival bid, it could leave investors facing the prospect of the share returning to its pre-bid region of €2.60.
Contrary to certain reports, it is thought the Madison Dearborn approach is not linked to Soros Private Equity Partners, the investment business controlled by financier Mr George Soros.
In a note yesterday, Goodbody Stockbrokers said speculation in the US suggested that Madison Dearborn made a bid on Tuesday.
A Smurfit spokeswoman said: "That was speculation and there's no substance to it."
The Jefferson Smurfit price reflects the operations of Smurfit Group and its 29.5 per cent share in US associate Smurfit Stone. It has been speculated that the Smurfit Stone stake - worth about €1.3 billion - would be distributed to shareholders in advance of a takeover.
The Smurfit Stone portion of the Jefferson Smurfit share price was worth about €1.153 per share at the close in Dublin yesterday.
Jefferson Smurfit shares have traded as high as €3.45 since it disclosed to the markets at the start of May that it had received an approach.
Goodbody analyst Mr Liam Igoe said in a note: "Our own view is that it would have to be significantly above the €3.30 recently speculated upon in the media."
The Madison Dearborn approach is conditional on the continued involvement of the group's chairman, Dr Michael Smurfit, and its management team after the sale. The approach is the subject of scrutiny by an independent sub-committee of the Smurfit board.
