Smurfit-Stone settles legal action

Smurfit-Stone has settled a class action in the United States, which claimed it had engaged in price-fixing. The decision will see it take a pre-tax charge of $106 million (€92 million) in the third-quarter figures, which have already been announced.

The third-quarter figures, published at the end of last month, had allowed for a charge of just $60 million in relation to the litigation. The additional charge increases the third-quarter net loss it reported on October 29th to $75 million, or 30 US cents a share, from $47 million, or 19 US cents a share.

The company, which was formerly an associate of the Jefferson Smurfit Group, has agreed to pay $92.5 million over charges that its subsidiaries conspired with rivals to raise and stabilise the price of corrugated boxes and sheets between October 1993 and November 1995.

The settlement relates to a period before the merger of Jefferson Smurfit Corp, which was 46 per cent owned by the then listed Irish group, and Stone Container Corp.

Smurfit-Stone estimates its Stone Container Corp subsidiary will pay about $56.5 million of the settlement, while Jefferson Smurfit Corp (US) will pay the balance. Half the amounts will be paid in December 2003 and the rest in January 2005.

However, the company noted there are still about 10 pending lawsuits that are not part of the settlement. The additional $46 million charge accounts for these lawsuits as well as the settlement.

The settlement follows similar agreements already concluded with other companies and brings to more than $200 million the total in settlements on the issue.

Mr Howard Langer, lead counsel for the plaintiffs, said the combined settlements were among the largest obtained nationally in a case of price fixing.

Many Irish investors hold shares in Smurfit-Stone as a result of the unwinding of the Smurfit group's interest in Smurfit-Stone before the Irish company was taken private.

Dr Michael Smurfit, who stepped down as chairman of the Smurfit Stone board earlier this year, has been a significant seller of the stock in recent weeks. Securities and Exchange Commission filings show he sold almost two million shares in the group in a six-week period in September and October, netting €21.3 million. Dr Smurfit still holds some Smurfit-Stone stock.

Smurfit Stone has already pencilled in a charge of about $100 million for the current quarter in relation to restructuring that will see it shed 1,400 jobs and close a plant to counter weak demand.

Shares of Smurfit-Stone fell 27 US cents, or 1.7 per cent, on the New York Stock Exchange following the announcement. They recovered most of that ground as the session wore on, closing down just 11 cents at $16.13.