Complex Deal May Unite 2 Big Paper Firms : Jefferson Smurfit and Container Corp. Involved

Jefferson Smurfit Group and Morgan Stanley on Friday announced a complicated financial restructuring that would unite two major paper producers under one corporate umbrella and would bring the corporate investors more than $1.5 billion in cash.

In the first of three steps of the proposed plan, Jefferson Smurfit Group of Dublin, Ireland, and an investment fund affiliated with Morgan Stanley & Co., a New York investment banking firm, would buy the publicly held shares of Jefferson Smurfit Corp. for $38 per share, or a total of about $100.5 million.

Jefferson Smurfit Group already owns 78% of St. Louis-based Jefferson Smurfit Corp., which manufactures paperboard, newsprint and packaging products. Jefferson Smurfit Group and the Morgan Stanley Leveraged Equity Fund II also jointly own Container Corp. of America, a major producer of paperboard and packaging products.

Would Recapitalize

In the second step, the Dublin company and Morgan Stanley are considering combining Jefferson Smurfit Corp. and Container Corp. of America into a new company, which they would jointly own.

Step three would be a recapitalization of Jefferson Smurfit Corp. and Container Corp., to be financed by “a major money center bank.”

The recapitalization would bring Jefferson Smurfit Group more than $1 billion in cash and the Morgan Stanley unit more than $500 million in cash, resulting in about $140 million in pretax investment revenue for Morgan Stanley. An offer would be made for Container Corp.’s publicly traded debentures, but terms have not yet been set.

The companies emphasized that a formal agreement has not been reached and a formal offer is not yet being made. Jefferson Smurfit Corp. appointed an outside group of directors to consider the proposal.