Bidder Surfaces for Jefferson Smurfit

Chicago-based firm studying acquisition of Irish-based paper company.

The mystery bidder for Jefferson Smurfit is a Chicago-based private equity firm that has never done a big deal in Europe.

Madison Dearborn Partners' attitude towards Europe can best be described as ambivalent: one banker said it shut a London office last year less than six months after it opened. (See earlier story -- Jefferson Smurfit Receives Acquisition Offer)

Yet the firm, started by former executives from First Chicago's venture capital arm and headed by John Canning, a well-known figure on the Chicago business scene, could be responsible for the biggest purchase of an Irish stock market listed company if it buys Smurfit for Pounds 2bn.

The firm last year raised $4 billion, so corporate financiers expect it would eventually bring on at least one partner if it decides to go ahead with an offer. Last week Jefferson Smurfit said it received an offer from a third party. The statement said that talks were at an early stage and could result in an offer for all or part of the Dublin-based cardboard box maker.

One Irish banker said he would be surprised if Michael Smurfit, chairman and chief executive, was not already involved in the sale process and possibly considering joining Madison Dearborn's bid for the company. Mr Smurfit is also chairman of Chicago-based Smurfit Stone Container, and spends time at the company's headquarters when he is not living in tax exile in Monaco.

Deutsche Bank is understood to be advising and prepared to finance a bid from Madison Dearborn. Rival bankers said Deutsche's Chicago office has also done business with Smurfit Stone. Deutsche Bank declined to comment on its role. A Madison Dearborn executive did not return calls yesterday.

The deal is said to have been under discussion for some time. UBS Warburg, Smurfit's adviser, is understood to have been trying to find a buyer for the business for the last six months. Indeed, one private equity financier said he looked at the business in December, but eventually decided against buying the company.

Relatively unknown outside the United States, Madison Dearborn is one of the biggest financial investors in paper and packaging. It already owns five paper and packaging-related companies.

According to the firm's web site, its paper and packaging businesses include Bay Street Paper, which makes recycled containerboard. Buckeye Cellulose is the world's largest producer of specialty cotton pulps and dissolving wood pulps.

In 1999, Madison Dearborn bought Packaging Corporation of America, which is one of the largest makers of containerboard and corrugated cardboard; it also owns PaperExchange.com, which is an on-line market for paper; and Riverwood Holding, a global packaging company.

Madison Dearborn is not the only private equity firm interested in the paper and packaging business, which has stable cash flows when the economy is strong. The Financial Times