Smurfit completes merger with rival Kappa

Jefferson Smurfit yesterday completed its merger with rival packaging group Kappa.

The deal was sealed with the payment of €300 million in cash to Kappa's shareholders along with a €75 million subordinated promissory note and the issue of shares in the new group

Smurfit Kappa will see the Irish group's shareholders retain a 58.3 per cent stake, most of it (52.5 per cent) held by Madison Dearborn which took the Irish group private in 2002.

The company also announced details of the refinancing of debt as part of the deal. The €2.93 billion borrowings will allow the company pay the €300 million cash sum promised to Kappa's private equity shareholders Cinven and CVC, which will remain significant shareholders in the enlarged group.

It will also involve the redemption of two sets of Kappa loan notes, both of which were due for repayment in 2009.

The new borrowings will be paid back over three years from 2012 to 2014. The initial repayment in 2012 will amount to €500 million with the remaining two payments each coming to €1.215 billion.

A series of loan notes issued by Jefferson Smurfit group as part of a separate refinancing by that company earlier this year remain in place. They include funds due for repayment in 2012 at rates of 9.625 and 10.125 per cent and other borrowing redeemable in 2015 at rates of 7.75 per cent and 11.5 per cent.

Smurfit Kappa has also organised an €875 million credit facility with its banks.

A spokesman for the company said the Smurfit Kappa refinancing had not seen any dividend paid to the group's shareholders apart from the previously agreed €300 million cash payment.

The earlier Smurfit refinancing had seen Dr Michael Smurfit receive a special dividend of €22 million while retaining his shareholding in Jefferson Smurfit. Other company executives also benefit from special dividends, including Dr Smurfit's son Tony, who received €1.8 million.

Dr Smurfit, who will hold a 4.3 per cent stake in the new group, will continue to serve as chairman.