RockTenn clears hurdle toward acquiring Smurfit-Stone after judge refuses to block deal
May 23, 2011
– A judge in Delaware has refused to block the deal by which RockTenn Co. would acquire Smurfit-Stone Container Corp., Reuters reported on May 20.
The ruling was in response to a suit by shareholders who argued that Smurfit-Stone’s board had improperly agreed to sell the company for less than it is worth and that the deal was tainted by conflicts of interest.
According to documents filed in Delaware’s Chancery Court, Smurfit Stone’s board relied on the advice of the bank Lazard, which stood to make US$23 million if the deal closed, rather than just $3 million if it did not.
In his ruling, Vice Chancellor Donald F. Parsons said that the board’s decision to retain and rely upon the work of Lazard “was not unreasonable and, as such, is not likely to provide a predicate for a violation of its members' fiduciary duties," Reuters reported.
Under the deal, if the company reached a change of control agreement by April, Smurfit-Stone CEO Patrick Moore, general counsel Craig Hunt and former president Steven Klinger stood to collect $38 million.
Shareholders of RockTenn and Smurfit-Stone are to vote on the deal on May 27. A vote against it is planned by investment funds that own 9% of Smurfit-Stone’s common stock.
The proposed deal for RockTenn to acquire its larger paper and packaging rival, for $3.5 billion, was announced on Jan. 24. The transaction would create North America’s second largest producer of both containerboard and coated recycled board.
The case is In re Smurfit-Stone Container Corp Shareholder Litigation, Delaware Chancery Court, No. 6164, Reuters reported.
The primary source of this article is Reuters, New York, New York, on May 20, 2011