US private equity firm Madison Dearborn plans to retain its 21.5 stake in Smurfit Kappa after a lock-in for its pre-flotation investors expires this weekend.
Madison Dearborn, which took the then Jefferson Smurfit private in 2002, said last night that it remains a long-term investor in the packaging business.
"To us, the expiration of the lock-up is irrelevant. We're supportive long-term shareholders of Smurfit Kappa and see real upside to the stock price," said Sam Mencoff, co-president of Madison Dearborn.
The imminent expiry of the lock-in has acted as a drag on the group's share price in recent weeks, and Mr Mencoff's remarks are the first public declaration of intent from any of the large shareholders who brought the Smurfit business back to the public markets last March.
"I can tell you further that we're known for being long-term shareholders. We have an investment in Packaging Corporation of America, which is a leading US containerboard producer," Mr Mencoff said.
"The company went public in early 2000 and we didn't sell a single share for nearly six years and remain shareholders to this day."
Pre-flotation investors in Smurfit Kappa were barred from selling down their shares for 180 days, a period which ends on Sunday.
The group realised almost €1.5 billion in its flotation, priced at €16.50 per share, the proceeds of which were used to pay down debt.
The offering on the Dublin and London markets was significantly over-subscribed.
Neither CVC nor Cinven, the private-equity firms that together hold 24.5 per cent of Smurfit Kappa, have declared their intentions ahead of the expiry. A spokesman in London for Cinven declined to comment yesterday on whether it would sell down or retain its stake and a CVC spokeswoman did not respond to the same query.
Smurfit Kappa's stock rose well above the flotation level to reach a high of €20.88 in May, but fell below the flotation price last month, amid severe volatility on the international markets, as the end of lock-in approached.
The share closed at €15.45 last night, almost 1 per cent weaker on the day in a flat market.
While the immediate plans of CVC and Cinven are not known, they were not sellers at €16.50 and would have to take a steep discount from the flotation price if they put their stake on the market now.
CVC and Cinven owned Kappa Packaging, the Dutch firm which merged with Jefferson Smurfit in 2005.
There was no comment from Smurfit Kappa yesterday on the intentions of its management, who were subject to the lock-in in respect of their 5 per cent stake in the business.
Also unknown are the intentions of private-equity firm Mid-Ocean, which has a 3.4 per cent stake.
After the retirement in March of Michael Smurfit, the dominant force in the business for decades, the Smurfit group is now chaired by Anglo Irish Bank chairman Seán FitzPatrick.
