THIS ANNOUNCEMENT IS RESTRICTED AND NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN OR INTO, THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA OR JAPAN
This announcement is an advertisement and not a prospectus and has been prepared in connection with the proposed offer of ordinary shares (the "Shares") of Smurfit Kappa plc ("Smurfit Kappa or the "Company") and the admission of the Shares to the Official List of the Irish Stock Exchange and to trading on its regulated market and admission to the Official List, as a secondary listing, of the UK Financial Services Authority (the "FSA") and to trading on the London Stock Exchange's main market for listed securities ("Admission"). Investors should not subscribe for or purchase any Shares referred to in this announcement except solely on the basis of information in the prospectus to be published by the Company in due course in connection with the global offer (the "Prospectus). Copies of the Prospectus will, following publication, be available in Ireland from the Company's registered office and Davy at Davy House, 49 Dawson Street, Dublin 2, and in the United Kingdom from Citigroup at Citigroup Centre, 33 Canada Square, Canary Wharf, London E14 5LB, Deutsche Bank AG, London Branch at Winchester House, 1 Great Winchester Street, London EC2N 2DB and Goldman Sachs International at Peterborough Court, 133 Fleet Street, London EC4A 2BB.
- Europe's largest integrated manufacturer of paper-based packaging products announces its intention to float on the Irish Stock Exchange
- 100 per cent. primary offering raising approximately €1,300 million to repay debt and optimise the capital structure
- Sean Fitzpatrick to join the Board as the new independent Chairman and Chairman of the Nominations committee
- Liam O'Mahony to join the Board as the senior independent director and Chairman of the Compensation Committee
- Nicanor Restrepo to join the board as an independent director and Chairman of the Audit Committee
Smurfit Kappa plc ("Smurfit Kappa or together with its subsidiaries, the "Group) today announces its intention to proceed with an offer of new ordinary shares to institutional investors in Ireland and elsewhere (the "Global Offer), raising approximately €1,300 million (before fees and expenses and before exercise of the over-allotment option described below) and to seek a primary listing for the Shares on the Irish Stock Exchange and a secondary listing on the London Stock Exchange.
Smurfit Kappa today " key highlights:
- Market leader in a changed industry with robust outlook
- Broad geographic reach with exposure to growth markets
- Strong platform " integrated operations, actively managed by performance driven management
- Strong cash focus and tight financial discipline
The Group is an integrated paper and paperboard manufacturer and converter whose operations are divided into packaging and specialties. The packaging segment is highly integrated. It includes a system of mills and plants that produce a full line of containerboard that is converted into corrugated containers. The Group's specialties segment primarily consists of its graphicboard and solidboard businesses, along with its sack paper and bag-in-box operations.
In terms of world market positions the Group is the largest producer of corrugated containers, the second largest producer of graphicboard and the third largest producer of containerboard.
Since 2002, the Group has strengthened its market leadership position through the merger with Kappa Packaging B.V., improved its asset base through the disposal of over €1,000 million of non-core and non-strategic assets and investments and rationalised its high cost capacity through the closure of eight plants across Europe.
Board Composition
Mr Sean Fitzpatrick will join the board of directors as the independent non-executive Chairman and Mr Liam O'Mahony and Mr Nicanor Restrepo are expected to join the board as independent non-executive directors upon Admission. Of the current board Sir Michael W.J. Smurfit will retire from the board immediately before Admission and Mr Hugh Briggs, Mr John Canning, Mr Valerio Massimo and Mr Thomas Souleles will retire from the board ahead of Admission.
Once these changes have taken place, the board will comprise three executive directors, three independent non-executive directors (including the new Chairman), four non-executive directors representing existing shareholders and Mr Frits Beurskens the former President of Kappa. Smurfit Kappa intends to be compliant with the Combined Code within a year of flotation.
Further biographical details on each of the board members upon Admission are included below.
Commenting on today's announcement, Gary McGann, Group Chief Executive of Smurfit Kappa, said:
"We are delighted to announce our intention to return to public markets. Industry conditions and Smurfit Kappa's business model today provide us with a compelling basis to deliver and sustain superior returns.
We would also like to record our appreciation for Michael's outstanding contribution to Smurfit Kappa specifically and to the industry generally. His vision transformed a small, locally trading box plant from Dublin into an industry leader.
Going forward we will continue to progress our objective of becoming the world's pre-eminent paper-based packaging group.
Commenting on today's announcement, Sir Michael W.J. Smurfit, outgoing Chairman of Smurfit Kappa, said:
"Industry conditions today are extremely attractive and, I believe, Smurfit Kappa is very well positioned to benefit from those conditions.
Smurfit Kappa has a clear vision of where it wants to be, strong earnings potential, an efficient capital structure and a proven team to sustain that vision."
Commenting on today's announcement, Sean Fitzpatrick, the incoming Chairman of Smurfit Kappa, said:
"I am honoured to accept this appointment. The strength of Smurfit Kappa's business today presents us with significant opportunity."
Details of the Global Offer
In connection with the Global Offer, the Company will issue new Shares raising approximately €1,300 million of gross proceeds for the Company. Existing shareholders will not be selling any shares in the Global Offer and have agreed not to do so for a period of at least 180 days post Admission. In addition, Deutsche Bank acting as stabilising manager may, in order to cover over-allotments and for stabilisation purposes, subscribe for or procure subscribers for over-allotment Shares up to a maximum of 15 per cent. of the total number of ordinary shares comprised in the Global Offer.
Deutsche Bank is acting as global coordinator of the Global Offer, with Citigroup, Davy, Deutsche Bank and Goldman Sachs acting as joint bookrunners. Davy and Deutsche Bank are acting as joint sponsors to the Company on the Irish Stock Exchange.
Smurfit Kappa intends to use the net proceeds of the Global Offer to refinance certain existing debt facilities. Certain Group subsidiaries announced today that they had commenced cash tender offers for all of the euro denominated 11.5% Senior Pay in Kind Notes due 2015 and a portion of the outstanding Senior Notes due 2012. These tender offers are conditional upon the completion of the Global Offer. Full details of the terms and conditions of the tender offers will be provided in the Offers to Purchase Statements, which will be released on launch of the tender offer.
Further details on Smurfit Kappa
The Group conducts its business in Europe and Latin America.
The Group currently owns 42 mills (30 of which produce containerboard for use in the manufacture of the Group's corrugated containers), 261 converting plants (most of which convert containerboard into corrugated containers), 43 reclamation facilities (which provide recovered paper for the Group's mills) and 27 other production facilities carrying on other related activities. The corrugated container market is a localised market and corrugated container plants need to be close (generally no more than 250 to 300 kilometres) to customers due to the relatively high cost of transporting this product. The Group's containerboard mills and corrugated converting operations are highly integrated and the Group's corrugated container plants convert most of the Group's own containerboard production into corrugated containers.
The Group's packaging segment accounted for approximately 86% of its revenue in 2006. The Group has facilities in 21 European countries, with its main operations in Germany, France, the Netherlands, Italy, Spain, the United Kingdom, Sweden, Ireland and Poland. In 2006, the Group produced over 4,600,000 tonnes of corrugated containers in Europe, of which approximately 70 per cent. was made using containerboard supplied by the Group's own mills. In the Group's specialties segment, the Group's conversion plants in Europe produced almost 590,000 tonnes of other paper-based packaging products, such as solidboard packaging, paper sacks and folding cartons, using a portion of the 1,240,000 tonnes of other grades of paper that were produced by the Group's mills.
The Group is the only pan-regional producer of containerboard and corrugated containers in Latin America, with operations in Mexico, Argentina, Venezuela, Colombia, the Dominican Republic, Puerto Rico, Chile, Ecuador and Costa Rica. These operations generated approximately 13 per cent. of the Group's gross sales for the year ended 31 December 2006 (with approximately 83 per cent. generated in Western Europe and approximately four per cent. generated in Eastern Europe). In 2006, the Group's Latin American operations produced almost 710,000 tonnes of containerboard, most of which was subsequently used in the manufacture by the Group of 780,000 tonnes of corrugated containers in Latin America. The Group's Latin American operations also produced almost 350,000 tonnes of other grades of paper, including boxboard, sack kraft and printing and writing paper.
Corrugated containers accounted for approximately 52 per cent. of the Group's gross sales for the year ended 31 December 2006, with containerboard constituting approximately 26 per cent., specialties approximately 12 per cent. and other approximately 10 per cent.
New Board upon Admission
Sean Fitzpatrick will join the board as Chairman upon Admission and serve as Chairman of the Nominations Committee. He retired as the Chief Executive Officer and was appointed Non-executive Chairman of Anglo Irish Bank Corporation plc in January 2005. He also serves as a Non-executive Director of the Dublin Docklands Development Authority, Greencore plc, Aer Lingus Group plc and as a member of the Council of the Institute of Chartered Accountants in Ireland.
Liam O'Mahony will join the board upon Admission and serve as the Company's Senior Non-Executive Director and Chairman of the Compensation Committee. He is the Chief Executive Officer of CRH plc, prior to which he held a number of senior management positions within the group. He is a member of The Irish Management Institute Council and of the Harvard Business School European Advisory Board
Nicanor Restrepo will join the board upon Admission as an independent Non-Executive Director and serve as Chairman of the Audit Committee. He is the retired President and Chief Executive Officer of Suramericana de Inversiones S.A. He is a director of Sofasa (Renault/Toyota) and Exito S.A. He has occupied several positions in the private sector and has received many awards both in Colombia and internationally.
Frits Beurskens serves as Deputy Chairman and has been a director of the Group since December 2005. He joined the Kappa Group in 1990 and held various Managing Director positions until his appointment as its President in 1996 which he held until the merger on December 1, 2005. He is chairman of CEPI (Confederation of European Paper Industries) and a member of the executive board of ICCA (International Corrugated Cases Association).
Gary McGann serves as Group Chief Executive Officer and as a director of the Group. He became Chief Executive Officer in November 2002 upon the retirement of Sir Michael Smurfit. He was appointed President and Chief Operations Officer of Smurfit Group on January 28, 2000. He joined Smurfit Group in 1998 as Chief Financial Officer. He had previously held a number of senior positions in both the private and public sectors over the last 20 years, including Chief Executive of Gilbeys of Ireland Group and Aer Lingus Group plc. He is Chairman of Dublin Airport Authority plc and a director of Anglo Irish Bank Corporation plc and United Drug plc.
Anthony Smurfit serves as Group Chief Operations Officer and as a director of the Group. He has worked in various parts of the Smurfit Group both in Europe and the United States. Prior to taking up his position as Chief Executive of Smurfit Europe in October 1999 and Chief Operations Officer on November 1, 2002, he was Deputy Chief Executive of Smurfit Europe and previously Chief Executive Officer of Smurfit France.
Ian Curley serves as Group Chief Financial Officer and as a director of the Group. He was appointed Chief Financial Officer of Smurfit Europe in 1997, prior to which he served as financial controller of Smurfit Continental Europe.
Christopher McGowan has served as a director of the Group since September 2002. He has been employed principally by Madison Dearborn since 1999 where he currently serves as a Director. He is a member of the board of directors of Forest Products Holdings, LLC (d.b.a. Boise Cascade).
Samuel Mencoff has served as a director of the Group since September 2002. He has been employed principally by Madison Dearborn since 1993 and currently serves as a Co-President. From 1987 until 1993, he served as Vice President of First Chicago Venture Capital. He is a member of the board of directors of Forest Products Holdings, LLC (d.b.a. Boise Cascade), Evanston Northwestern Healthcare and Packaging Corporation of America, and a member of the board of trustees of Brown University.
Gordon Moore has served as a director of the Group since December 2006. He joined Cinven in 1996 from S.G. Warburg. Since joining Cinven he has held directorships with a number of investee companies including Fitness First, Odeon and NCP, and is currently a director of Phadia. He is also a director of Worth School.
Rolly van Rappard has served as a director of the Group since December 2005. He was a member of the Supervisory Board of Kappa from 1998. He held positions at Citicorp prior to becoming a managing partner of CVC Capital Partners in 1989. He is also a member of the Supervisory board of Wavin B.V., Veen Bosch and Keuning Uitgevers N.V and Danske Traelast.
2006 Financials
Smurfit Kappa plc was incorporated on 24 January 2007. On 31 January 2007 Smurfit Kappa plc completed a share for share exchange under which the shareholders of Smurfit Kappa Group Limited exchanged their shares on a one for one basis in Smurfit Kappa plc.
The following selected financial data relates to Smurfit Kappa Group Limited.
Selected financial data for Smurfit Kappa Group Limited
| Year Ended | Year Ended | |
| December 31, 2006 | December 31, 2005 | |
|  | € Million | € Million |
| Â | ||
| Revenue | 6,970 | 4,423 |
| Â | ||
Pre-exceptional EBITDA(a) | 883 | 507 |
| Â | ||
| EBITDA | 596 | 450 |
| Â | ||
| Pre-exceptional income / (loss) before income tax | 136 | (199) |
| Â | ||
| (Loss) before income tax | (143) | (289) |
| Â | ||
| Net cash inflow from operating activities | 293 | 183 |
| Â | ||
| Net debt | 4,882 | 4,894 |
(a)Before stock compensation expense
Selected financial data has been extracted from the unaudited financial statements of Smurfit Kappa Group Limited, prepared under International Financial Reporting Standards.
Disclaimer
The contents of this announcement, which have been prepared by and are the sole responsibility of the Group, have been approved by Davy at Davy House, 49 Dawson Street, Dublin 2, Citigroup at Citigroup Centre, 33 Canada Square, Canary Wharf, London E14 5LB, Deutsche Bank AG, London Branch at Winchester House, 1 Great Winchester Street, London EC2N 2DB and Goldman Sachs International at Peterborough Court, 133 Fleet Street, London EC4A 2BB solely for the purposes of section 21(2)(b) of the Financial Services and Markets Act 2000 of the United Kingdom.
Deutsche Bank AG, London Branch is authorised under German Banking Law (Competent authority: BaFin - Federal Financial Supervising Authority) and with respect to UK commodity derivatives business by the Financial Services Authority and is regulated by the Financial Services Authority for the conduct of UK business. Deutsche Bank AG is acting for Smurfit Kappa and no one else in connection with the Global Offer and will not be responsible to anyone other than the Smurfit Kappa for providing the protections afforded to clients of Deutsche Bank AG nor for providing advice in connection with the Global Offer.
Davy, which is regulated in Ireland by the Financial Regulator, and Citigroup and Goldman Sachs, each of which are authorised and regulated in the United Kingdom by the FSA, are acting exclusively for Smurfit Kappa, and no-one else in connection with the Global Offer. They will not regard any other person as their clients in relation to the Global Offer and will not be responsible to anyone other than the Smurfit Kappa for providing the protections afforded to their respective clients, nor for providing advice in relation to the Global Offer, the contents of this announcement or any transaction, arrangement or other matter referred to herein.
This announcement does not constitute an offer of, or the solicitation of an offer to buy or subscribe for, Shares to any person in any jurisdiction to whom or in which such offer or solicitation is unlawful and, in particular, is not for release, publication or distribution in or into the United States, Australia, Canada or Japan.
The offer and sale of the Shares has not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States absent registration under the Securities Act or an available exemption from it, or under the applicable securities laws of Australia, Canada or Japan. The Shares may not be offered or sold in Australia, Canada, Japan or the United States or to, or for the account or benefit of, any national, resident or citizen of Australia, Canada, Japan or the United States.
Stabilisation
In connection with the Global Offer, Deutsche Bank, as stabilising manager, or any of its agents, may, to the extent permitted by applicable law, over-allot and effect transactions with a view to supporting the market price of the ordinary shares at a level higher than that which might otherwise prevail in the open market. Deutsche Bank is not required to enter into such transactions and such transactions may be effected on the Irish Stock Exchange, London Stock Exchange, any over-the-counter market or otherwise. Such stabilising measures, if commenced, may be discontinued at any time and may commence on or after publication of the offer price and will end no later than 30 days thereafter. Save as required by law or regulation, neither Deutsche Bank nor any of its agents intends to disclose the extent of any over-allotments and/ or stabilisation transactions under the Global Offer. Stabilisation/FSA
Forward Looking Statements
This announcement contains certain "forward-looking statements". In particular, the words "expects", "anticipates", "plans", "intends", "estimates", "may", "should", "believes" and similar expressions can be used to identify forward-looking statements. Certain important factors could cause actual results or outcomes to differ materially from those expressed in forward-looking statements. These statements are based on the Group's directors' expectations of external conditions and events, current strategy, plans and other objectives of management, and estimates and projections of the Group's financial position. Although the directors of the Group believe these expectations to be reasonable at the date of this announcement, they may prove to be erroneous. Forward-looking statements involve known and unknown risks and uncertainties and speak only as of the date they are made. Investors are cautioned that certain important factors could cause actual results or outcomes to differ materially from those expressed in forward-looking statements.
This announcement does not constitute a recommendation concerning the Global Offer. The value of shares can go down as well as up. Past performance is not a guide to future performance. Potential investors should consult a professional advisor as to the suitability of the Global Offer for the individual concerned.
