Smurfit-Stone sued by shareholder over buyout
Smurfit-Stone Container Corp., after exiting bankruptcy last year, was sued by a shareholder who contends investors will be shortchanged in a $3.5 billion buyout by Rock-Tenn Co.
Smurfit-Stone stock owner John M. Marks claims company directors are duty-bound to get the best price and that the cash-stock buyout offer undervalues the Chicago-based company.
“The proposed transaction is inadequate” in part because the company “had emerged from bankruptcy in 2010, and appeared poised to capitalize on its strengthened financial condition,” Marks alleged in a complaint filed today in Delaware Chancery Court.
Rock-Tenn, based in Norcross, Georgia, agreed last month to buy Smurfit-Stone for about $35 per share, half in cash and half in Rock-Tenn stock, according to court papers. Smurfit shares were trading above $37 today.
The company, which makes paper-based packaging and corrugated containers, has 12 paper mills, 110 container plants and 29 reclamation plants, according to court documents. It has operations in Canada, Mexico, China, Puerto Rico and the U.S.
The combination would form North America's second-largest containerboard producer.
Smurfit-Stone exited bankruptcy after fighting with shareholders over its reorganization plan.
Smurfit-Stone had been battling over whether the company would be worth enough once it left bankruptcy to give shareholders anything. The company settled the dispute by giving common and preferred shareholders 4.5 percent of the reorganized company.
Under the company's reorganization proposal, unsecured creditors were to receive stock in return for canceling as much as $3.1 billion in debt.
Timothy T. Griffith, Smurfit-Stone's vice president of investor relations and treasurer, didn't immediately respond to a phone call seeking comment. Other Smurfit officials didn't immediately return three calls to their media-relations department telephone line.
Smurfit fell 5 cents to $37.72 in New York Stock Exchange composite trading. Rock-Tenn fell 27 cents to $67.39 on the NYSE.
The Chancery case is Marks v. Smurfit-Stone, CA6164, Delaware Chancery Court (Wilmington). The bankruptcy case was Smurfit-Stone Container Corp., 09-10235, U.S. Bankruptcy Court, District of Delaware (Wilmington).