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Luck Of The Irish?


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LUCK OF THE IRISH?

Easing himself into an armchair in an elegant Cannes casino, Michael W.J. Smurfit recalls his impromptu boat race with the King of Spain. Smurfit, one of Ireland's richest businessmen, was motoring off the Spanish coast a decade ago when a cigarette boat piloted by Juan Carlos pulled alongside, challenging him to race. Not only did Smurfit lose, but he also threw his back out.

Smurfit, now 58, needed surgery as a result, and his back still gives him considerable pain. But life continues to afford him plenty of thrills, especially in business, where his Jefferson Smurfit Group PLC is an up-and-comer in the paper and packaging business. On Aug. 2, his company agreed to pay $1.04 billion for Cellulose du Pin, the paper and packaging unit of France's Compagnie de Saint-Gobain.

BIG COMPETITOR. It's a bold move: Although the deal makes Jefferson Smurfit the top European maker of cardboard boxes, a ho-hum but rich business in good times, the industry has been suffering through the worst downturn in 50 years. Smurfit is betting a big recovery will prove the wisdom of his purchase. He's also betting he can land enough acquisitions in Europe and Asia to turn his $2.2 billion Dublin company into one of the world's top paper and packaging makers. "Michael is a natural competitor," explains his No.2 man, President and COO Howard E. Kilroy, who also serves as governor of the Bank of Ireland. "He wants to be the best and the fastest."

This natural competitor has lately had a tough time, however. Struggling through the recession, his company reported five straight years of decline in its pre-tax profits. To be fair, that's better than the outright losses recorded by some rivals. But his heavily leveraged 1986 purchase of Mobil Oil Corp.'s Container Corp. of America also had trouble paying interest on $2.6 billion in debt. As a result, the Irish parent has had to pump $550 million back into the U.S. business since 1992.

Trouble was brewing on other fronts. In 1991, Smurfit was forced to resign as chairman of Telecom Eireann over allegations that he had profited from a property purchase by Ireland's phone company. A subsequent investigation cleared him of any wrongdoing, but then another controversy erupted. He and his company invested $25 million in the British leisure group Brent Walker PLC, shortly before the chairman was charged with theft and falsifying company accounts. Jefferson Smurfit never got its $25 million back. Put it all together, says the soft-spoken Smurfit, and "the last four years have been hell."

Yet Smurfit knows how to keep slogging. After leaving school at 16 to join the family business, Smurfit became chairman and CEO after a stroke killed his father in 1977. Through dozens of acquisitions and close cost control, he helped transform what was then a small cardboard box business into one of Ireland's largest industrial concerns.

Along the way, Smurfit, aided by a $375 million fortune, has become one of Ireland's best-known tycoons. He has had a business school named after him, amassed one of the country's biggest private art collections, and served as chairman of Ireland's Racing Board. One of his 75 racehorses won the prestigious Melbourne Cup in Australia. His divorce and remarriage caused a sensation in Catholic Ireland. He also raised eyebrows when he made Monaco his legal residence for tax reasons.

ALL IN THE FAMILY? Despite the whirl of outside activities, Smurfit has no plans to retire at 65. Nor will he give up his joint role as chairman and CEO, despite criticism by some institutional investors that too much power is concentrated in one executive. Investors also privately voice concern at the elevation of his 30-year-old son, Tony, to Smurfit's board in 1989, and the fact that the company's outside directors are outvoted 8 to 7 by Smurfit nominees, four of them family members. Not a problem, says Smurfit. "Investors want continuity, too, as long as we're making money for them." Plus, he's making Tony work hard by having him run the folding carton business in Britain, the company's most troubled division. "That's how I'm bloodying him," Smurfit explains.

Smurfit expects a pickup in Europe will soon add extra profits to his company's bottom line. In the U.S., he says, "we're out of the woods." Some plant closings and a partial stock offering have further improved finances in the U.S. business, and analysts expect the North American paper industry to turn up soon, despite a rash of wildcat strikes in Canada's papermills. Meanwhile, Smurfit is devoting the next six months to his French acquisition, which lost $94 million on sales of $1.3 billion last year. For Michael Smurfit, the race is far from over.

MICHAEL SMURFIT'S HIGHS AND LOWS

1977

Appointed chairman and CEO of his family's packaging company.

1979

Named chairman of Ireland's state-owned telecom company, Telecom Eireann.

1986

Acquires Container Corp. of America from Mobil for $1.2 billion.

1991

Resigns from Telecom Eireann following allegations of self-dealing in a property transaction. An investigation later clears him.

1992

Shores up U.S. operation with $400 million.

1994

Agrees to acquire Compagnie de Saint-Gobain's packaging division for $1.04 billion.

DATA:COMPANY REPORTS,BUSINESS WEEKJulia Flynn in Cannes


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