Jefferson Smurfit Group and its US associate company Smurfit Stone, will co-ordinate the management of their European packaging operations. The move aims to cut costs in the short term with a takeover of Smurfit Stone's European business possible in the future. The Irish company owns 33 per cent of Smurfit Stone.

Under the plan, the chief executive (Europe) of Jefferson Smurfit, Mr Tony Smurfit, will head the combined management team, with sales and marketing operations of both companies being merged under specific product lines such as corrugated containers and paperboard.

"Under the plan, the companies will present a unified face to European customers and expand their services and market presence',' Smurfit stated.

While both companies emphasise that their respective European operations will retain separate legal, ownership, and profit responsibilities for their separate businesses, market sources believe this may be the precursor to a more formalised relationship between Smurfit and Smurfit Stone, possibly leading to Smurfit buying out Smurfit Stone's European operations.

Since the 1998 merger between Jefferson Smurfit Corporation and Stone Container that created Smurfit Stone, the US company has been headed by former Smurfit finance director Mr Ray Curran. In this capacity, Mr Curran has presided over a rigorous cost-cutting operation as well as asset sales aimed at reducing Smurfit Stone's heavy debt. At the end of the third quarter, Smurfit Stone's debt stood at $5.8 billion (#5.74 billion) but is expected to be significantly lower at year-end as a result of asset disposals.

Both Smurfit and Smurfit Stone are expected to benefit in the new year from another increase in the price of linerboard, with the industry finally beginning to get to grips with the overcapacity that has plagued it in previous cycles. Many thousands of tonnes of capacity have been permanently removed, and the balance between supply and demand has shifted substantially to the packaging companies from their clients.

If this positive price environment is maintained, many in the industry see a merger between Smurfit and Smurfit Stone as a logical outcome. Smurfit Stone has a stock market value of $4.8 billion (#4.75 billion), while Jefferson Smurfit is worth #3.1 billion.