Smurfit sells Condat

The Jefferson Smurfit Group has sold French paper subsidiary Condat for £215 million to Italian company, Garda. While Smurfit is to take a 17 per cent stake in the merged Garda/Condat Group at a cost of £36 million, the move represents a further step towards concentrating on its core packaging business. The group had received a "good exit price" from the sale, according to group chairman and chief executive, Dr Michael Smurfit. Smurfit only had a small share of the area of the paper market in which Condat operated, he pointed out, and the sale to Garda was a natural further step in the essential consolidation of the sector worldwide.

The retaining of a stake in the merged operation would be an investment for the group, according to Dr Smurfit, and continued an alliance under which the Smurfit Group had brought manufacturing expertise and technology to Condat, which it acquired as a loss-maker as part of the acquisition of the Saint-Gobain paper and packaging operations in 1994.

Condat operates a coated woodfree mill and will be merged into the operations of Garda, a leading company in the sector, creating one of Europe's leading producers of coated woodfree papers.

The cash raised will benefit Smurfit's already strong balance sheet. Dr Smurfit said that no decision had been made on how the cash realised from the sale would be used, but pointed out that the group had committed to pay $500 million to Morgan Stanley to buy out its stake in JS Corporation, as part of the merger transaction with Stone.

However, he said he was legally constrained from commenting further on this proposed transaction.

Commenting on the international outlook, he said that "the global economy is clearly in trouble" and the situation now required "a concerted effort by policymakers", possibly including measures such as lower interest rates in economies such as the US. The main danger was Latin American countries "catching Asian flu". But, whatever happened in that region, Smurfit companies there were strong and the fall-out as it affected weaker competitors might create opportunities for mergers or acquisitions by the group.

On the uncertain outlook for product prices, a key factor depressing the Smurfit share price, he said he could not forecast when the turning point would come, but "when the upturn comes it could be quite dramatic". Financial markets sometimes over-react to developments and the group's shares had a volatile record, he said, but management had to concentrate on building the business.