The share price jumped following an approach for the group, but this comesafter a decade of dull performance, writes Mary Canniffe

"Thirty-six years ago, when I was appointed as managing director, Smurfit faced an uncertain future. It was a case of take over or be taken over. We chose the former," Dr Michael Smurfit told shareholders in the group's latest annual report.

Thirty-six years later, with the group itself a takeover target, the Jefferson Smurfit Group has come full circle. Set up in the 1930s by his father Jefferson, the group has grown by acquisition and organically to become one of the biggest publicly quoted paper-makers in the world.

While Smurfit shares jumped to an interday high of €3.45 on the bid news and have outperformed the Irish market over the past year, they disappointed investors through the 1990s.

Over the past year, as the group signalled a series of moves to reduce operating costs and maximise the profit potential of its asset base, the share price has edged ahead relative to the market after a decade of underperformance.

At the €2.66 cent pre-bid announcement closing price on Tuesday, Smurfit shares had outperformed the Irish market by 2 per cent over the past month, by 11 per cent over the past three months, by 22 per cent over six months and by 45 per cent over the past year.

But this more recent outperformance follows a very dull performance through the 1990s, when the company fell from its premier position as the largest Irish publicly quoted company to its current eighth position, where it now represents just under 4 per cent of the ISEQ index.

The shares last hit yesterday's post-bid €3.45 price in 1998, though that year they fluctuated between a high of €3.52 and a low of €1.12.

Group directors and management own some 11 per cent of the group. Within this category, Dr Smurfit owns 6.8 per cent of the company - worth about €232 million at yesterday's €3.13 closing price.

Dr Smurfit and other Smurfit family members own just over 9 per cent of the group.

The ownership structure of the group has changed significantly in recent years. After a drive to build up its US shareholder base, some 55 per cent of the shares are now owned by US institutions, while the stake held by Irish institutions has fallen to about 15 per cent. British institutions own about 7 per cent of the company while EU institutions hold about 3 per cent. Irish retail investors own about 8 per cent of the group with their stake currently valued at around €271 million.

Dr Smurfit recently announced he would step down in October from the chief executive portion of his dual chief executive/chairman role. In recent years there has been criticism of his lucrative remuneration arrangements while the share price remained in the doldrums as well as his holding the two top positions at the group.

Operating in the cyclical paper market, the company has been hit by weak demand and pricing in volatile economic conditions. Pre-tax profits before exceptional items for 2001 were down 20 per cent to €386 million.

Headquartered in Dublin, the Jefferson Smurfit Group is one of the largest European-based manufacturers of containerboard, corrugated containers and other paper-based packaging products.

It owns 29 per cent of the US-based Smurfit Stone Container Corporation (SSCC) following the merger in November 1998 of its US operation Jefferson Smurfit Corporation and Stone Container Corporation.

Group operations span four continents and 30 countries, and it employs some 68,000 people in 600 plants in Europe, Latin America and North America and in smaller operations in Asia.

It operates integrated containerboard mills and corrugated container operations converting containerboard internally in its corrugated container plants.

'Products include containerboard, corrugated containers, folding cartons, paper sacks and décor base paper.

The group is a major collector of wastepaper for recycling. On the Irish market, Smurfit has a current market capitalisation of €3.4 billion.