Jefferson Smurfit has succeeded in its bid to gain control of Munksjo, the Swedish niche paper-maker in which it already holds a 33 per cent stake. Jane O'Sullivan reports.

Smurfit raised its cash offer for Munksjo to 85 Swedish kroner per share (€9.32) yesterday before buying shares in the market to take its stake to more than 55 per cent.

The paper-maker bought 7.8 million Munksjo shares on the Stockholm stock exchange from a mix of hedge funds and institutional shareholders to take its holding above the 50 per cent level that gives it effective control.

It decided to raise its offer after its previous 77 kroner per share bid, which valued the group at €243 million, was rejected by Munksjo's board and main shareholders. They said it was too low and did not reflect the value of the business and its future potential.

The new offer, which values Munksjo at around €270 million, is open until March 28th and is not conditional upon any level of acceptance being reached, unlike the previous bid. But if Smurfit gets 90 per cent acceptances, it can compulsorily acquire the remaining shares.

The new offer is a 33 per cent premium to Munksjo's share price on the last trading day before the announcement of Smurfit's first bid on January 29th.

Munksjo declined to comment on the new offer yesterday but said it would be discussed at a board meeting on March 19th.

However, shares in the group rose 3 per cent to 85 kroner in Stockholm yesterday, indicating the market's belief that the bid would be accepted.

Smurfit's bid to buy out the 66 per cent of Munksjo it does not already own is part of a strategy to rationalise its operations and eliminate minority shareholdings.

Smurfit said it would continue to develop Munksjo and run the company as it is. "Strategically, it is a perfect fit for Smurfit group in that the packaging side fits our geographic coverage in Europe where we are not otherwise represented and the specialty paper side fits very well in our specialties division which is a growth area for us," Smurfit's chief operations officer, Mr Gary McGann, said yesterday.

Smurfit shares closed just one cent higher at €2.63 in Dublin yesterday. - (Additional reporting by Reuters)