Smurfit-Stone Container Corporation Hit By Investor Lawsuit In Effort To Block Merger

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Company Name(s): 
Smurfit-Stone Container
Case Name: 
Smurfit-Stone Container Deal Case 02/02/2011
Case Status: 
Lawsuit Filed
Case Status: 
Settlement Proposed
Affected Securities
NYSE: SSCC
Lawsuit Overview
Type of Lawsuit: 
Mergers and Acquisition
Date Filed: 
02/02/2011
Summary: 

OCTOBER 2011 - Settlement proposed for a class action brought by shareholders of Smurfit-Stone Container Corp., which was bought by Rock-Tenn in May.

FEBRUARY 2011 - An investor in Smurfit-Stone Container Corp (SSCC) shares filed a lawsuit in State Court against Smurfit-Stone, RockTenn and certain Smurfit-Stone executives. The plaintiff alleges that investors will be shortchanged in the proposed buyout.

According to complaint the plaintiff alleges that the defendants breached their fiduciary duty owed to the shareholders of Smurfit-Stone Container Corporation (NYSE:SSCC) arising out of their attempt to sell Smurfit-Stone Container to RockTenn.

Seven months after Chicago based Smurfit Stone Container emerged from bankruptcy RockTenn (NYSE:RKT) and Smurfit-Stone Container Corporation (NYSE:SSCC) announced last month that their Boards of Directors have approved an agreement under which Smurfit-Stone Container Corp will become a wholly owned subsidiary of RockTenn. Under the terms of the proposed agreement the aggregate consideration, consisting of 50% cash and 50% RockTenn stock, is valued at $35 per-share of Smurfit-Stone Container Corporation common stock or an aggregate equity value of the transaction, based on the closing price of RockTenn's common stock on January 21, 2011, of approximately $3.5 billion. Smurfit-Stone Container Corp said that the offer represents a 27% premium to Smurfit-Stone Container Corp's closing stock price on January 21, 2011.
Smurfit-Stone Container Corp’s 12 months Total Revenue went from $7.157billion in 2006 to $5.574billion in 2009. For the first three quarters in 2010 Smurfit-Stone Container Corp reported a combined 9months Total Revenue of $4.658billion. Smurfit-Stone Container shares (SSCC) traded recently at $27.52 per share.

But the plaintiff alleges that the proposed transaction undervalues Smurfit-Stone Container and is inadequate” in part because the company “had emerged from bankruptcy in 2010, and appeared poised to capitalize on its strengthened financial condition”.