s6346254a.htm

0000899140-11-000079.txt : 20110207 0000899140-11-000079.hdr.sgml : 20110207 20110207164418 ACCESSION NUMBER: 0000899140-11-000079 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20110207 DATE AS OF CHANGE: 20110207 GROUP MEMBERS: DANIEL S. LOEB GROUP MEMBERS: MDRA GP LP GROUP MEMBERS: MONARCH ALTERNATIVE CAPITAL LP GROUP MEMBERS: MONARCH GP LLC GROUP MEMBERS: ROBERT W. MEDWAY GROUP MEMBERS: ROYAL CAPITAL MANAGEMENT, LLC GROUP MEMBERS: YALE M. FERGANG SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SMURFIT-STONE CONTAINER Corp CENTRAL INDEX KEY: 0000094610 STANDARD INDUSTRIAL CLASSIFICATION: PAPERBOARD MILLS [2631] IRS NUMBER: 362041256 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-17921 FILM NUMBER: 11579166 BUSINESS ADDRESS: STREET 1: SIX CITY PLACE DRIVE CITY: CREVE COEUR STATE: MO ZIP: 63141 BUSINESS PHONE: 314-656-5300 MAIL ADDRESS: STREET 1: SIX CITY PLACE DRIVE CITY: CREVE COEUR STATE: MO ZIP: 63141 FORMER COMPANY: FORMER CONFORMED NAME: SMURFIT-STONE CONTAINER ENTERPRISES INC DATE OF NAME CHANGE: 20041102 FORMER COMPANY: FORMER CONFORMED NAME: STONE CONTAINER CORP DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Third Point LLC CENTRAL INDEX KEY: 0001040273 IRS NUMBER: 133922602 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 390 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2122247400 MAIL ADDRESS: STREET 1: 390 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: THIRD POINT MANAGEMENT CO LLC DATE OF NAME CHANGE: 19970602 SC 13D 1 s6346254a.htm s6346254a.htm

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

Smurfit-Stone Container Corporation

(Name of Issuer)

Class A Common Shares, $0.01 Par Value

(Title of Class of Securities)

832727101

(CUSIP Number)

Third Point LLC

390 Park Avenue, 18th Floor

New York, NY 10022

(212) 224-7400

Royal Capital Management, LLC

623 Fifth Avenue, 24th Floor

New York NY 10022

(212) 920-3400

Monarch Alternative Capital LP

535 Madison Avenue

New York, NY 10022

(212) 554-1700

(Name, Address and Telephone Number of Person

Authorized to Receive Notices and Communications)

(with copies to)

Michael A. Schwartz, Esq.

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, NY 10019

(212) 728-8267

February 1, 2011

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box: o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 240.13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No. 832727101				Page 2 of 15 Pages
1	NAME OF REPORTING PERSON Third Point LLC
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS AF
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) o
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 2,250,000 (see Item 5)
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 2,250,000 (see Item 5)
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,250,000 (see Item 5)
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) 60; o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 2.46%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) OO

CUSIP No. 832727101				Page 3 of 15 Pages
1	NAME OF REPORTING PERSON Daniel S. Loeb
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS AF
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) o
6	CITIZENSHIP OR PLACE OF ORGANIZATION United States
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 2,250,000 (see Item 5)
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 2,250,000 (see Item 5)
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,250,000 (see Item 5)
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) 60; o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 2.46%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) IN

CUSIP No. 832727101				Page 4 of 15 Pages
1	NAME OF REPORTING PERSON Royal Capital Management, LLC
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS AF
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) o
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 2,787,500 (see Item 5)
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 2,787,500 (see Item 5)
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,787,500 (see Item 5)
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 3.04%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) OO

CUSIP No. 832727101				Page 5 of 15 Pages
1	NAME OF REPORTING PERSON Yale M. Fergang
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS AF
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) o
6	CITIZENSHIP OR PLACE OF ORGANIZATION United States
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 2,787,500 (see Item 5)
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 2,787,500 (see Item 5)
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,787,500 (see Item 5)
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) 60; o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 3.04%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) IN

CUSIP No. 832727101				Page 6 of 15 Pages
1	NAME OF REPORTING PERSON Robert W. Medway
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS AF
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) o
6	CITIZENSHIP OR PLACE OF ORGANIZATION United States
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 2,787,500 (see Item 5)
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 2,787,500 (see Item 5)
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,787,500 (see Item 5)
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 3.04%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) IN

CUSIP No. 832727101				Page 7 of 15 Pages
1	NAME OF REPORTING PERSON Monarch Alternative Capital LP
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS AF
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) o
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 3,181,868 (see Item 5)
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 3,181,868 (see Item 5)
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,181,868 (see Item 5)
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 3.47%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) PN

CUSIP No. 832727101				Page 8 of 15 Pages
1	NAME OF REPORTING PERSON MDRA GP LP
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS AF
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) o
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 3,181,868 (see Item 5)
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 3,181,868 (see Item 5)
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,181,868 (see Item 5)
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) 60; o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 3.47%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) PN

CUSIP No. 832727101				Page 9 of 15 Pages
1	NAME OF REPORTING PERSON Monarch GP LLC
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS AF
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) o
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 3,181,868 (see Item 5)
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 3,181,868 (see Item 5)
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,181,868 (see Item 5)
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 3.47%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) OO

Item 1. Security and the Issuer

This Schedule 13D relates to the shares of Class A Common Stock of Smurfit-Stone Container Corporation (the “Issuer”). The principal executive offices of the Issuer are located at 222 N. LaSalle Street, Chicago, Illinois 60601.

Item 2. Identity and Background

(a) This Schedule 13D is being filed by:

(i) Third Point LLC, a Delaware limited liability company (“Third Point”), and Daniel S. Loeb (“Mr. Loeb and, together with Third Point, the “Third Point Reporting Persons”);

(ii) Royal Capital Management, LLC, a Delaware limited liability company (“Royal Capital”), Yale M. Fergang (“Mr. Fergang”) and Robert W. Medway (“Mr. Medway and, together with Royal Capital and Mr. Fergang, the “Royal Capital Reporting Persons”); and

(iii) Monarch Alternative Capital LP, a Delaware limited partnership (“Monarch”), MDRA GP LP, a Delaware limited partnership (“MDRA GP”), and Monarch GP LLC, a Delaware limited liability company (“Monarch GP” and, together with Monarch and MDRA GP, the “Monarch Reporting Persons”).

Each of the Third Point Reporting Persons, the Royal Capital Reporting Persons and the Monarch Reporting Persons are hereinafter sometimes collectively referred to as the “Reporting Persons.”

Schedule I hereto set forth lists of all of the directors and executive officers or persons holding equivalent positions of Monarch GP (the “Scheduled Persons”, each a “Scheduled Person”).

(b)

(i) The principal business address of the Third Point Reporting Persons is 390 Park Avenue, 18th Floor, New York, NY 10022;

(ii) The principal business address of the Royal Capital Reporting Persons is 661 Fifth Avenue, 24th Floor, New York, NY 10022; and

(iii) The principal business address of the Monarch Reporting Persons is 535 Madison Avenue, New York, NY 10022.

Schedule I hereto sets forth the principal business address of each Scheduled Person.

(c)

(i) The principal business of Third Point is to serve as investment manager or adviser to a variety of hedge funds and managed accounts (such funds and accounts, collectively, the “Third Point Funds”), and to control the investing and trading in securities of the Third Point Funds. The principal occupation of Mr. Loeb is serving as Chief Executive Officer of Third Point.

(ii) The principal business of Royal Capital is to serve as investment manager or adviser to a variety of hedge funds (such funds, collectively, the “Royal Capital Funds”), and to control the investing and trading in securities of the Royal Capital Funds. The principal occupation of each of Messrs. Fergang and Medway is Managing Member of Royal Capital.

(iii) The principal business of Monarch is to serve as investment manager or adviser to a variety of hedge funds and managed accounts (such funds and accounts, collectively, the “Monarch Funds”), and to control the investing and trading in securities of the Monarch Funds. The principal business of MDRA GP is to be the general partner of Monarch. The principal business of Monarch GP is to be the general partner of MDRA GP.

Schedule I hereto sets forth the principal occupation or employment of each Scheduled Person.

(d), (e) During the last five years, none of the Reporting Persons nor any of the Scheduled Persons (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree, or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f) Each of Messrs. Loeb, Fergang and Medway are citizens of the United States of America.

Schedule I hereto set forth the citizenships of each of the Scheduled Persons.

Item 3. Source and Amount of Funds or Other Consideration.

The Third Point Funds expended an aggregate of approximately $63,050,000 of their working capital in open market transactions to acquire the 2,500,000 shares of Class A Common Stock held by them.

The Royal Capital Funds acquired 2,022,700 of the shares of Class A Common Stock held by them pursuant to the Modified Joint Plan of Reorganization for Smurfit-Stone Container Corporation and its Debtor Subsidiaries and Plan of Compromise and Arrangements for Smurfit-Stone Container Canada, Inc. and Affiliated Canadian Debtors, dated May 26, 2010 (collectively, the “Plan of Reorganization”), in exchange for debt securities having an aggregate principal amount of $63,705,700. In addition, the Royal Capital Funds expended an aggregate of approximately $14,790,000 of their working capital in open market transactions to acquire the additional 764,800 shares of Class A Common Stock held by them.

The Monarch Funds acquired 2,981,868 of the shares of Class A Common Stock held by them pursuant to the Plan of Reorganization, in exchange for 937,000 shares of common stock and debt securities having an aggregate principal amount of $93,775,000. In addition, the Monarch Funds expended an aggregate of approximately $7,038,000 of their working capital in open market transactions to acquire the additional 200,000 shares of Class A Common Stock held by them.

Item 4. Purpose of Transaction.

The Reporting Persons originally acquired their shares of Class A Common Stock subject to this Schedule 13D for investment purposes.

On January 23, 2011, the Issuer announced that it had agreed to be acquired by Rock-Tenn Company (“Rock-Tenn”) in a merger transaction in which each share of Class A Common Stock would be converted into the right to receive $17.50 in cash and 0.30605 shares of the common stock of Rock-Tenn, valued as of the date of the announcement at $35.00 per share (the “Proposed Merger”). The Reporting Persons believe that the Transaction substantially undervalues the Issuer, and, on January 27, 2011, representatives of Third Point, Royal Capital and Monarch (collectively, the “Management Companies”) discussed wh ether there might be a basis for the Management Companies to work together to oppose the Proposed Merger. On February 1, 2011, the Management Companies agreed to work together to oppose the Proposed Merger and to jointly send to the board of directors of the Issuer (the “Board of Directors”) a letter stating that each of the Management Companies intended to vote the shares of Class A Common Stock as to which it has voting power and explaining the reasons for those voting decisions. The Management Companies’ letter was finalized and sent to the Board of Directors, and issued publicly in the form of a press release, on February 2, 2011. A copy of the press release, which includes in its entirety the Management Companies’ letter to the Board of Directors, is attached hereto as Exhibit 99.2.

To formalize their agreement to act together in opposition to the Proposed Merger, the Management Companies entered into a written agreement (the “Cooperation Agreement”) on February 7, 2011, pursuant to which they agreed, among other things, to jointly retain legal counsel, jointly file this Schedule 13D and any amendments hereto and to share certain expenses in connection with their joint efforts. A copy of the Cooperation Agreement is attached hereto as Exhibit 99.3.

Except as set forth herein, including in any Exhibits hereto, the Reporting Persons have no present plans or proposals that relate to or would result in any of the matters set forth in subparagraphs (a) – (j) of Item 4 of Schedule 13D. The Third Point Reporting Persons, Royal Capital Reporting Persons and Monarch Reporting Persons intend to review their respective investments in the Issuer on a continuing basis and may, separately or jointly, communicate or engage in discussions with management of the Issuer, the Board of Directors, other shareholders of the Issuer and/or representatives of Rock-Tenn concerning (i) the Proposed Merger, (ii) any shareholder vote on the Proposed Merger and/or (iii) the business, operations, managem ent, strategy and future plans of the Issuer. Depending on various factors, including the Issuer's financial position and strategic direction, the outcome of the matters referenced above (including matters related to the Proposed Merger or any competing transaction proposed by any third party), actions taken by the Issuer’s Board of Directors, price levels of the Class A Common Stock, other investment opportunities available to the Reporting Persons, conditions in the securities markets and general economic and industry conditions, the Third Point Reporting Persons, Royal Capital Reporting Persons and Monarch Reporting Persons may in the future take such actions with respect to the investments in the Issuer respectively managed by them as they deem appropriate, including, without limitation, purchasing or selling shares of Class A Common Stock or engaging in short selling of, or any hedging or derivative transactions with respect to, the Class A Common Stock. Notwithstanding the f oregoing, the Reporting Persons expressly disclaim any intention of engaging in a control transaction or a contested election of directors with respect to the Issuer.

Item 5. Interest in Securities of the Issuer.

A.	Third Point Reporting Persons

(a) As of the date of this Schedule 13D, the Third Point Reporting Persons beneficially own an aggregate of 2,250,000 shares of Class A Common Stock, representing approximately 2.46% of the Class A Common Stock outstanding. Percentages of the Class A Common Stock outstanding reported in this Schedule 13D are calculated based upon the 91,644,859 shares of Class A Common Stock represented by the Issuer as outstanding as of January 20, 2011 in the Agreement and Plan of Merger dated as of January 23, 2011 included as Exhibit 2.1 to the Issuer’s Current Report on Form 8-K filed by the Issuer with the Securities and Exchange Commission on January 24, 2011.

(b) Each of the Third Point Reporting Persons shares voting and dispositive power over the shares of Class A Common Stock held directly by the Third Point Funds.

(c) Set forth on Schedule II hereto are all transactions of the Class A Common Stock effected during the past sixty days by the Third Point Reporting Persons.

(d) Other than the Third Point Funds that directly hold shares of Class A Common Stock, no other person is known to have the right to receive, or the power to direct the receipt of, dividends from or proceeds from the sale, of Class A Common Stock held by them.

(e) Not applicable.

B.	Royal Capital Reporting Persons

(a) As of the date of this Schedule 13D, the Royal Capital Reporting Persons beneficially own an aggregate of 2,787,500 shares of Class A Common Stock, representing approximately 3.04% of the Class A Common Stock outstanding.

(b) Each of the Royal Capital Reporting Persons shares voting and dispositive power over the shares of Class A Common Stock held directly by the Royal Capital Funds.

(c) Set forth on Schedule II hereto are all transactions of the Class A Common Stock effected during the past sixty days by the Royal Capital Reporting Persons.

(d) Other than the Royal Capital Funds that directly hold shares of Class A Common Stock, no other person is known to have the right to receive, or the power to direct the receipt of, dividends from or proceeds from the sale, of Class A Common Stock held by them.

(e) Not applicable.

C.	Monarch Reporting Persons

(a) As of the date of this Schedule 13D, the Monarch Reporting Persons beneficially own an aggregate of 3,181,868 shares of Class A Common Stock, representing approximately 3.47% of the Class A Common Stock outstanding.

(b) Each of the Monarch Reporting Persons shares voting and dispositive power over the shares of Class A Common Stock held directly by the Monarch Funds.

(c) Set forth on Schedule II hereto are all transactions of the Class A Common Stock effected during the past sixty days by the Monarch Reporting Persons.

(d) Other than the Monarch Funds that directly hold shares of Class A Common Stock, no other person is known to have the right to receive, or the power to direct the receipt of, dividends from or proceeds from the sale, of Class A Common Stock held by them.

(e) Not applicable.

By virtue of the agreements and arrangements among the Reporting Persons described in this Schedule 13D, the Reporting Persons may be deemed to constitute a “group” within the meaning of Section 13(d)(3) under the Act and Rule 13d-5(b)(1) thereunder and each member of the “group” may be deemed to beneficially own all shares of Class A Common Stock by all members of the “group.” Accordingly, each of the Reporting Persons may be deemed to beneficially own 8,219,368 shares of Class A Common Stock, constituting beneficial ownership of 8.97% of the shares of Class A Common Stock.

The Third Point Reporting Persons expressly disclaim voting and investment power with respect to any Class A Common Stock held by any person or entity other than the Third Point Funds. The Royal Capital Reporting Persons expressly disclaim voting and investment power with respect to any Class A Common Stock held by any person or entity other than the Royal Capital Funds. The Monarch Reporting Persons expressly disclaim voting and investment power with respect to any Class A Common Stock held by any person or entity other than the Monarch Funds.

Item 6.

Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.

Pursuant to Rule 13d-1(k) promulgated under the Exchange Act, the Reporting Persons have entered into a Joint Filing Agreement, a copy of which is filed with this Schedule 13D as Exhibit 99.1, with respect to the joint filing of this Schedule 13D and any amendment or amendments thereto.

On February 7, 2011 the Management Companies entered into the Cooperation Agreement, described in Item 4 hereto.

Pursuant to the Plan of Reorganization, Royal Capital and Monarch may become entitled to receive additional shares of Class A Common Stock depending upon the final resolution of certain litigation in connection with the reorganization of the Issuer. The number of such shares of Class A Common Stock that Royal Capital and Monarch may become entitled to receive cannot be determined at this time, but is anticipated to be, in the aggregate, less than 1% of the Class A Common Stock Outstanding.

Other than as described herein, there are no contracts, arrangements, understandings or relationships (legal or otherwise) between the Reporting Persons and any other person with respect to the securities of the Issuer.

Item 7. Material to be filed as Exhibits.

1.	Exhibit 99.1 - Joint Filing Agreement, dated February 7, 2011

2.	Exhibit 99.2 - Cooperation Agreement, dated as of February 7, by and among Third Point LLC, Royal Capital Management, LLC and Monarch Alternative Capital LP

3.	Exhibit 99.3 - Press Release, dated February 2, 2011, containing the Management Companies’ letter to the Board of Directors of Smurfit-Stone Container Corporation

SIGNATURES

After reasonable inquiry and to the best of each of the undersigned’s knowledge and belief, each of the undersigned, severally and not jointly, certifies that the information set forth in this statement is true, complete and correct.

Dated: February 7, 2011 THIRD POINT LLC

By: /s/ William Song

Name: William Song

Title: Attorney-in-Fact

Dated: February 7, 2011 DANIEL S. LOEB

By: /s/ William Song

Name: William Song

Title: Attorney-in-Fact

Dated: February 7, 2011 ROYAL CAPITAL MANAGEMENT, LLC

By: /s/ Yale M. Fergang

Name: Yale M. Fergang

Title: Managing Member

Dated: February 7, 2011 YALE M. FERGANG

/s/ Yale M. Fergang

Dated: February 7, 2011 ROBERT W. MEDWAY

/s/ Robert W. Medway

Dated: February 7, 2011 MONARCH ALTERNATIVE CAPITAL LP

By: MDRA GP LP, its General Partner

By: Monarch GP LLC, its General Partner

By: /s/ Michael Weinstock

Name: Michael Weinstock

Title: Member

Dated: February 7, 2011 MDRA GP LP

By: Monarch GP LLC, its General Partner

By: /s/ Michael Weinstock

Name: Michael Weinstock

Title: Member

Dated: February 7, 2011 MONARCH GP LLC

By: /s/ Michael Weinstock

Name: Michael Weinstock

Title: Member

SCHEDULE I

Monarch GP LP

Name and Position of Officer or Director	Principal Business Address	Principal Occupation or Employment	Citizenship
Andrew Herenstein	535 Madison Avenue New York, NY 10022	Managing Principal of Monarch GP LLC	United States
Christopher Santana	535 Madison Avenue New York, NY 1002	Managing Principal of Monarch GP LLC	United States
Michael Weinstock	535 Madison Avenue New York, NY 1002	Managing Principal of Monarch GP LLC	United States

SCHEDULE II

This Schedule sets forth information with respect to each purchase and sale of Shares which was effectuated by a Reporting Person during the past sixty days. Unless otherwise indicated, all transactions were effectuated in the open market through a broker.

THIRD POINT LLC

Trade Date	Shares Purchased (Sold)	Price Per Share ($)
12/8/2010	100,000	24.9040
12/8/2010	100,000	24.9364
12/8/2010	125,000	24.9353
12/8/2010	100,000	24.9821
12/9/2010	25,000	25.2500
12/9/2010	125,000	25.2922
12/9/2010	30,000	25.2275
12/10/2010	130,000	25.5069
12/13/2010	65,000	25.8702
12/13/2010	52,000	25.9337
12/14/2010	123,000	26.3000
12/14/2010	25,000	26.1000
12/23/2010	10,000	25.7700
12/27/2010	150,000	25.7383
12/27/2010	74,700	25.7265
12/28/2010	75,000	25.3803
12/29/2010	37,900	25.5037
12/29/2010	37,000	25.3970
12/30/2010	115,400	25.7757
12/31/2010*	(16,800)	25.6000
12/31/2010*	16,800	25.6000
1/4/2011	5,000	25.2500
1/4/2011	17,200	25.2151
1/6/2011	250,000	27.0000
1/6/2011	55,000	26.8677
1/6/2011	72,800	26.8494
1/7/2011	50,000	26.7715
1/7/2011	50,000	26.8494
1/31/2011*	(42,000)	37.3500
1/31/2011*	42,000	37.3500
2/1/2011	131,300	37.5680
2/1/2011	118,700	37.7497

*Rebalancing trade.

ROYAL CAPITAL MANAGEMENT, LLC

Trade Date	Shares Purchased (Sold)	Price Per Share ($)
1/4/2011*	(190,500)	26.3200
1/4/2011*	190,500	26.3200
1/20/2011	(11,190)	27.7600
1/20/2011	11,190	27.7600
1/24/2011	(137,500)	35.5443

*Rebalancing trade.

MONARCH ALTERNATIVE CAPITAL LP

Trade Date	Shares Purchased (Sold)	Price Per Share ($)
1/24/11	200,000	35.1900

EX-99.1 2 s6346254b.htm JOINT FILING AGREEMENT s6346254b.htm

Exhibit 99.1

JOINT FILING AGREEMENT

PURSUANT TO RULE 13d-1(k)

The undersigned acknowledge and agree that the foregoing statement on Schedule 13D is filed on behalf of each of the undersigned and that all subsequent amendments to this statement on Schedule 13D may be filed on behalf of each of the undersigned without the necessity of filing additional joint filing agreements. The undersigned acknowledge that each shall be responsible for the timely filing of such amendments, and for the completeness and accuracy of the information concerning him or it contained herein or therein, but shall not be responsible for the completeness and accuracy of the information concerning the others, except to the extent that he or it knows or has reason to believe that such information is inaccurate.

Dated: February 7, 2011 THIRD POINT LLC

By: /s/ William Song

Name: William Song

Title: Attorney-in-Fact

Dated: February 7, 2011 DANIEL S. LOEB

By: /s/ William Song

Name: William Song

Title: Attorney-in-Fact

Dated: February 7, 2011 ROYAL CAPITAL MANAGEMENT, LLC

By: /s/ Yale M. Fergang

Name: Yale M. Fergang

Title: Managing Member

Dated: February 7, 2011 YALE M. FERGANG

/s/ Yale M. Fergang

Dated: February 7, 2011 ROBERT W. MEDWAY

/s/ Robert W. Medway

Dated: February 7, 2011 MONARCH ALTERNATIVE CAPITAL LP

By: MDRA GP LP, its General Partner

By: Monarch GP LLC, its General Partner

By: /s/ Michael Weinstock

Name: Michael Weinstock

Title: Member

Dated: February 7, 2011 MDRA GP LP

By: Monarch GP LLC, its General Partner

By: /s/ Michael Weinstock

Name: Michael Weinstock

Title: Member

Dated: February 7, 2011 MONARCH GP LLC

By: /s/ Michael Weinstock

Name: Michael Weinstock

Title: Member

EX-99.2 3 s6346254c.htm COOPERATION AGREEMENT s6346254c.htm

Exhibit 99.2

COOPERATION AGREEMENT

This COOPERATION AGREEMENT (this “Agreement”) is dated February 7, 2011 by and among Third Point LLC (“Third Point”), Royal Capital Management, LLC (“Royal Capital”) and Monarch Alternative Capital LP (“Monarch” and, together with Third Point and Royal Capital, the “Managers”).

RECITALS

WHEREAS, each of the Managers is a beneficial owner of shares of the Class A Common Stock (the “Common Stock”) of Smurfit-Stone Container Corporation (“Smurfit”)held directly by investment funds managed by it;

WHEREAS, on January 23, 2011, Smurfit announced an agreement to be acquired by Rock-Tenn Company (“Rock-Tenn”) in a merger transaction in which each share of Common Stock would be converted into the right to receive $17.50 in cash and 0.30605 shares of common stock of Rock-Tenn, valued as of the date of the announcement at $35.00 per share, the (“Proposed Merger”); and

WHEREAS, each of the Managers believes that the Proposed Merger undervalues the Common Stock and intends to oppose the Proposed Merger; and

WHEREAS, each of the Managers wishes to cooperate with the others in a joint effort to oppose the Proposed Merger (the “Joint Project”);

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements herein contained, the parties hereto, each intending to be legally bound, hereby agree as follows:

1. Certain Definitions. As used herein, the following terms shall have the following meanings, except as otherwise expressly provided herein:

a. “beneficial owner” and “beneficial ownership” shall have the meanings ascribed to them by Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations thereunder.

b. “affiliate” of any person shall mean any other person that controls, is controlled by or is under common control with that person. Managed funds and accounts shall be deemed to be affiliates of the Manager that serves as their investment manager or adviser.

2. Coordination of Opposition to the Proposed Merger. The Managers agree to act together in pursuing the Joint Project and, in connection therewith:

a. Counsel. Each Manager agrees that Willkie Farr & Gallagher LLP (“Willkie Farr”) shall be engaged to act as legal counsel.

b. Joint Schedule 13D. Each Manager agrees to join (together with any affiliates of such Manager who have Schedule 13D filing obligations with respect to the Common Stock) in the filing with the United States Securities and Exchange Commission (the “SEC”) of a joint Schedule 13D and any necessary or appropriate amendments thereto (collectively, the “Joint 13D”) in respect of the Managers’ beneficial ownership of Common Stock. Each Manager agrees to execute and deliver a joint filing agreem ent and such additional instruments and documents as Willkie Farr may reasonably request in connection with the Joint 13D.

c. Information. In connection with the preparation of the Joint 13D, each Manager agrees to provide to Willkie Farr (i) such information as would be required to be included in a Schedule 13D with respect to the Common Stock if such Manager were filing a Schedule 13D on its own without the other Managers and (ii) such other information as may be reasonably requested by Willkie Farr in connection with the preparation and filing of the Joint 13D.

d. Information Updates. In order to ensure that amendments to the Joint 13D are made “promptly” as required by the rules of the SEC, each Manager agrees to advise Willkie Farr of any transactions in the Common Stock (no later than the trade date of any such transaction) and of any other fact or circumstance of which it becomes aware that might reasonably require amendment of the Joint 13D (no later than the date on which such Manager becomes aware of any such other fact or circumstance).

e. Accuracy of Information. Each Manager agrees that all information provided by such Manager to Willkie Farr in connection with the preparation of the Joint 13D or for the purpose of rendering legal advice to the Managers shall be true and correct.

f. Compliance. Each Manager agrees to comply with all applicable laws in connection with the Joint Project, including, but not limited to, Section 13(d) of the Exchange Act and the rules and regulations thereunder and the proxy rules (Regulation 14A) of the SEC.

3. Representations and Warranties. Each of the Managers represents and warrants to each of the other Managers as follows:

a. Authority. Such Manager has full right, power and authority to enter into this Agreement and perform its obligations hereunder;

b. Binding Agreement. This Agreement has been duly executed and delivered by it and constitutes its valid and binding agreement, enforceable against it in accordance with its terms;

c. No Consents, Violations. The execution, delivery and performance of this Agreement by such Manager will not (i) require the consent or approval of or any material filing with any governmental or regulatory body, other than filings required under U.S. federal or state securities laws, or (ii) violate, conflict with or constitute a default under (A) its limited liability company or partnership agreement or any other constitutive documents of such Manager, (B) any law, rule or regulation applicable to such Manager or any of its affiliates or (C) any agreement, contract, order, judgment or decree binding upon such Manager or its affiliates; and

d. Beneficial Ownership. Other than as described in the Joint 13D to be filed on February 7, 2011, none of such Manager or any of its affiliates (i) is the beneficial owner of any Common Stock or (ii) has any agreement, arrangement or understanding with any person for the purpose of acquiring, holding, voting or disposing of any securities of the Company.

4. Expenses. The Managers agree that the fees and expenses of Willkie Farr, and any other expenses in connection with the Joint Project that are agreed to in writing by all Managers, whether incurred by them directly or on their behalf, shall be “Joint Expenses”. Each of the Managers shall be responsible for its pro rata share of all Joint Expenses, based on the number of shares of Common Stock beneficially owned by each of them relative to the number of shares of Common Stock beneficially owned by all of them. The Managers agree to prorate and apportion among t hem, on the foregoing basis, all Joint Expenses incurred during each calendar month based on the number of shares of Common Stock beneficially owned by each Manager on the last calendar day of the immediately preceding month. Each Manager agrees to provide to the others on a prompt basis an accurate accounting of the number of shares of Common Stock beneficially owned by them as at each relevant calendar month end. For purposes of this Section 4, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, except that shares of Common Stock shall not be deemed beneficially owned by a Manager if such beneficial ownership arises solely by virtue of Section 13(d)(3) of the Exchange Act or Rule 13d-5(b)(1) thereunder (i.e., if such shares would be deemed beneficially owned solely by virtue of being deemed to be a member of a “groupR 21; with one or more other Managers).

5. Coordination of Public Statements. Each Manager agrees that it shall, and shall cause its affiliates to, consult with the other Managers and Willkie Farr prior to making any public statement or announcement concerning Smurfit, their beneficial ownership of Common Stock and/or the Proposed Merger and, where any of the Managers objects to all or any part of a public statement or announcement, not to make such public statement or announcement except to the extent it is believed in good faith, based on the advice of Willkie Farr, to be required by applicable law or regulation.

6. No Agency or Advisory Relationship. Except as expressly provided herein, each Manager is acting independently of the others with respect to its beneficial ownership of Common Stock, and no Manager has the authority to represent or bind any other Managers. Each Manager is a sophisticated financial investor that has conducted and will continue to conduct its own investigation into the affairs of Smurfit as it may deem necessary for the purposes of its ownership of Common Stock, and no Manager is providing any other Manager with investment, tax, legal or other advice. No Manager is a fiduciary of any other Manager.

7. Termination. This Agreement shall automatically terminate upon the written notice of a Manager to each of the other Managers and Willkie Farr that such Manager is withdrawing from the Joint Project, unless the remaining Managers agree that this Agreement shall survive as a binding agreement between them. Notwithstanding any termination of this Agreement, Section 4 of this Agreement shall be binding on each Manager with respect to any fees and expenses of Willkie Farr or other expenses that are incurred prior to such Manager’s withdrawal from the Joint Project.

8. No Third Party Beneficiaries. Unless expressly stated herein, this Agreement shall be solely for the benefit of the parties hereto and no other person or entity.

9. Binding Agreement. This Agreement constitutes a valid and binding obligation enforceable against each of the parties hereto in accordance with its terms.

10. Limitation on Assignment; Successors and Permitted Assigns. None of the parties hereto may assign any of its respective rights or obligations under this Agreement. This Agreement is intended to bind and inure to the benefit of the parties and their respective successors, heirs, executors administrators and representatives.

11. Governing Law. This Agreement shall be governed by and construed in accordance with the domestic law of the State of New York, without giving effect to any choice of law or conflict of laws provision or rule (whether State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.

12. Headings. The headings of the sections, paragraphs and subsections of this Agreement are inserted for convenience only and shall not affect the interpretation hereof.

13. Counterparts. This Agreement may be executed in one or more counterparts (including via facsimile or other electronic transmission), each of which shall be deemed an original and all of which shall together constitute one and the same agreement.

* * * * *

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed and delivered by its duly authorized officer as of the date first written above.

THIRD POINT, LLC

By: /s/ William Song

Name: William Song

Title: CCO

Shares of Common Stock Beneficially Owned by Third Point: 2,250,000

ROYAL CAPITAL MANGEMENT, LLC

By: /s/ Yale M. Fergang

Name: Yale M. Fergang

Title: Managing Member

Shares of Common Stock Beneficially Owned by Royal Capital: 2,787,500

MONARCH ALTERNATIVE CAPITAL LP

By: MDRA GP LP, its General Partner

By: Monarch GP LLC, its General Partner

By: /s/ Michael Weinstock

Name: Michael Weinstock

Title: Member

Shares of Common Stock Beneficially Owned by Monarch: 3,181,868

EX-99.3 4 s6346254d.htm PRESS RELEASE Unassociated Document

Exhibit 99.3

THIRD POINT, ROYAL CAPITAL MANAGEMENT, AND MONARCH ALTERNATIVE CAPITAL SEND LETTER TO SMURFIT-STONE BOARD OF DIRECTORS

NEW YORK, NY – February 2, 2011 – Third Point LLC, Royal Capital Management, L.L.C. and Monarch Alternative Capital LP announced today that they had sent the following letter to the Board of Directors of Smurfit-Stone Container Corporation (NYSE: SSCC) announcing and explaining their intention to vote against the proposed merger of Smurfit-Stone Container with a subsidiary of Rock-Tenn Company:

VIA EMAIL

February 2, 2011

Mr. Ralph F. Hake, Chairman

Mr. Patrick J. Moore, Director and Chief Executive Officer

Mr. Timothy J. Bernlohr, Director

Mr. Terrell K. Crews, Director

Mr. Eugene I. Davis, Director

Mr. Michael E. Ducey, Director

Mr. Jonathan F. Foster, Director

Mr. Ernst A. Häberli, Director

Mr. Arthur W. Huge, Director

Mr. James J. O’Connor, Director

Smurfit-Stone Container Corporation

222 N. LaSalle Street

Chicago, IL 60601

Attention: Ralph F. Hake, Chairman

Gentlemen:

Investment funds we manage are shareholders of Smurfit-Stone Container Corporation (“Smurfit” or the “Company”), collectively holding approximately 9% of the Company’s outstanding common stock (the “Common Stock”). Our managed funds received more than 60% of our shares in the Company’s bankruptcy reorganization, and owned more than 96% of our current holdings before the Company announced its agreement to be acquired by Rock-Tenn Company (“Rock-Tenn”) in a cash-and-stock merger (the “Merger”). We are writing to express our disappointment at the merger terms you approved, and to announce our intention to vote against the Merger as it stands today.

We believe that the acquisition by Rock-Tenn substantially undervalues the Company and we are acutely disappointed that the Board of Directors is willing to throw in the towel on the significant upside inherent in the Company’s assets. To add insult to injury, it appears that the Company did not run a sale process, apparently in violation, or at least in ignorance, of your duties to shareholders to seek the best price available. Finally, we cannot help but wonder whether Mr. Patrick Moore’s employment contract, which is set to expire on March 31st of 2011, played any part in pushing for this sale, given that he personally stands to earn a windfall in excess of $15 million as a result of the Merger.

One need look no further than the action of Rock-Tenn’s stock price following the announcement of the Merger. Typically, when an acquirer is deemed to have paid a “full and fair price” for a target, the acquirer’s shares trade down. It is telling to note that the price of Rock-Tenn common stock is UP 18% since the announcement, clear evidence that the market believes Rock-Tenn is getting a steal. This evidence is further buttressed by comments made by the CEO of Rock-Tenn in a conference call announcing the Merger (more on that below).

In short, we cannot help but conclude that the Board has forsaken its primary duty to maximize value for shareholders. We believe that, ultimately, Rock-Tenn would have been willing to pay significantly more for the strategic assets of the Company, and that there is still an opportunity for other buyers (perhaps with more potential synergies) to come forward with a valuation that is significantly higher than the implied Rock-Tenn deal price. Further, we believe that if the Board and management simply rolled up their sleeves and continued on the Company’s current course, Smurfit shareholders would be better off on a stand-alone basis than we would be if we were to accept the terms of the Rock-Tenn transaction.

The Proposed Transaction Represents a Significant Discount to Precedent Valuations

$500 Million to $1.1 Billion Asset Ignored and Adjusted EBITDA Significantly Discounted

Rock-Tenn’s press release announcing the transaction asserts that $35.00 per share implies a Total Enterprise Value (“TEV”) to Adjusted EBITDA multiple for Smurfit of 6.1x. In fact, we think the multiple is closer to 5.1x for the following reasons.

First, while Rock-Tenn chose to include Smurfit’s full after-tax unfunded pension liability in its TEV calculation, it neglected to include the value of Smurfit’s sizable net operating loss (“NOL”) asset of $500 million. On a “tax effected” basis, the NOL is worth ~$190 million or ~$1.88 per Smurfit share. This figure doesn’t even include the possibility of an additional $650 million in NOLs that may be realized if the IRS permits Smurfit’s treatment of Black Liquor tax credits received in 2009. On a “tax effected” basis, the additional NOL from these tax credits would conservatively be worth ~$250 million or ~$2.45 per Smurfit share.

Second, Rock-Tenn annualized Smurfit’s fourth quarter 2010 Adjusted EBITDA of $205 million, resulting in a “run-rate” figure of $820 million, even though Rock-Tenn CEO James Rubright acknowledged on the January 24th conference call announcing the Merger (the “Conference Call”) that this Adjusted EBITDA figure was based on “the seasonally weakest December quarter.” Annualizing Smurfit’s adjusted EBITDA for the six months ended December 31, 2010 is far more appropriate, and Mr. Rubright himself acknowledged that “if we had used trailing six month pro formas … for Smurfit, particularly given the fact that those are the post-bankruptcy operating results, it would have been higher” than $820 million. 60; Moreover, Smurfit has reported anticipated SG&A savings of $50 million in 2011 from actions already taken. As these savings are prospective, they obviously are not included in the “run rate” for the fourth quarter of 2010. Thus, if we were to annualize Smurfit’s trailing six month Adjusted EBITDA and add the SG&A savings, we would arrive at a more appropriate “run-rate” for 2011 Adjusted EBITDA of $938 million. It is unlikely that the entire $110 per ton of containerboard price increases were fully reflected in the earnings in the second half of 2010 due to Smurfit's exposure to semi-annual and annual contracts. International Paper and Temple-Inland announced on their third quarter earnings calls that they had realized $95 and $93 per ton of the price increases, respectively, at September 30, 2010. This “run rate” figure also does not include the significant benefit from a successful implementation of the 2011 price increase already announced by one of Smurfit’s competitors. Additionally, we are not alone in our views regarding Smurfit’s earning potential. Goldman Sachs research analyst Richard Skidmore published a report on January 9th, the most recent report published by a major firm before the Merger, which estimated Smurfit’s 2011 EBITDA at $938 million.

As illustrated below, Rock-Tenn’s announced valuation multiple of 6.1x times drops to a paltry 5.1x with the adjustments described above. We will not know until we see the proxy statement for this transaction, but we wonder just what numbers Smurfit’s board was looking at when it approved the Merger? This is the critical question, because if Rock-Tenn had been willing to pay 6.1 times the more appropriate Adjusted EBITDA of $938 million, and if an appropriate value had been ascribed to the NOL, Smurfit’s shareholders would receive nearly $44.00 per share of Common Stock in the Merger.

		EBITDA	Illustrative
	Rock-Tenn	Adjusted	Potential
	Valuation	Valuation	Valuation

Cash	$449	$449	$449
Debt	1,194	1,194	1,194
After Tax Pension	700	700	700
Net Debt and Pension	1,445	1,445	1,445

NOLs	--	(190)	(190)

Fully Diluted Shares (mm)	101	101	101
Price per Share	$35.00	$35.00	$43.98
Market Capitalization	3,536	3,536	4,443
TEV	$4,981	$4,791	$5,698

Smurfit Run Rate Adjusted EBITDA	$820	$938	$938
Implied TEV / Adjusted EBITDA	6.1x	5.1x	6.1x

Even Mr. Rubright has acknowledged that the Adjusted EBITDA used to arrive at the 6.1x figure is questionable: “It’s not hard to have annualized to a higher number than the one [Rock-Tenn] used.” It may not be hard, but one can only wonder whether the Smurfit Board did so when it approved the Merger. We await the proxy statement to learn precisely what Adjusted EBITDA figure the Board had in mind.

Historical Multiples are Significantly Higher

Whether the multiple is 5.1x or 6.1x, precedent transactions in this industry are significantly higher. In fact, Lazard Frères & Co., the same company that gave a fairness opinion to the Board for this transaction, testified in the Summer of 2010 during Smurfit’s bankruptcy plan confirmation hearing that precedent containerboard transactions over the last decade had a median TEV to EBITDA ratio of 7.7x! With recent consolidation, one could argue that transactions in the industry should command an even higher multiple. As illustrated below, a multiple of 7.7x and the appropriate Adjusted EBITDA would bring consideration to approximately $59 per share. Even if we used Rock-Tenn& #8217;s intentionally understated Adjusted EBITDA of $820 million, a 7.7x multiple would bring consideration to approximately $50 per share. Again, we look forward to reviewing the proxy statement to determine how the Board and its advisers could possibly have gotten comfortable with this anemic premium.

	Precedent Transaction Mult.
	Rock-Tenn	2H10A
	Adj. EBITDA	Adj. EBITDA

Cash	$449	$449
Debt	1,194	1,194
After Tax Pension	700	700
Net Debt and Pension	1,445	1,445

NOLs	(190)	(190)

Fully Diluted Shares (mm)	101	101
Price per Share	$50.07	$59.07
Market Capitalization	5,059	5,968
TEV	$6,314	$7,223

Smurfit Run Rate Adjusted EBITDA	$820	$938
Implied TEV / Adjusted EBITDA	7.7x	7.7x

Questionable Sale Process

A low transaction multiple is tough to swallow in any context, but it is a particularly bitter pill when it has resulted from a sale process that appears to be anything but robust. While we await the proxy statement to confirm this, Mr. Rubright’s comments on the Conference Call that “this transaction was exclusively negotiated on a one-on-one basis,” and that Rock-Tenn “[doesn’t] like to do transactions that are in a process,” lead us to believe that the Company and its advisers did not set up a competitive process for this asset. In our experience, providing a would-be acquirer an exclusive opportunity to bid on your company, failing to conduct a market-check and ultimately signing a merger agreement without a “go-shop” provision and with a termination fee that borders on the high-end of reasonable is a likely indication that incentives of the Board are misaligned with those of the shareholders. One need look no further for misalignment than the interests of CEO and Director Patrick J. Moore.

After leading Smurfit into a bankruptcy that wiped out its prior shareholders, Mr. Moore was rewarded by being re-hired by the Board as Smurfit’s CEO for a period of 9 months, scheduled to terminate on March 31, 2011. While moderate retirement packages for CEOs are commonplace, Mr. Moore appears to have hit the jackpot with his. In addition to receiving pension, health and other benefits, and becoming eligible for a “special incentive” bonus of $3.5 million upon retirement, he was granted a “change of control bonus” in his short-term employment agreement that would pay him a substantial sum if the Company received a “change of control” offer (such as for the Merger) before his retirement date and the transaction were to occur on or before September 30, 2011. Tellin gly, he would receive nothing if, by that date, no change of control has occurred. Under this bonus provision, Mr. Moore stands to realize, by our account, a windfall payment of approximately $19 million (less any “special incentive” bonus he’s received) upon the closing of the Merger! Collectively, the Smurfit officers are getting $42 million. It is therefore not hard to imagine the incentives that pushed Mr. Moore, and possibly the Board, towards accepting this transaction with an eager buyer (especially at this price) without bothering to conduct a market check. Shareholders, however, do not receive the same special benefits, and we cannot help but wonder whether his looming retirement motivated Mr. Moore to push for a less-than-optimal result for his shareholders.

Smurfit Could Go It Alone and Shareholders Would be Better Off

It is no secret that Smurfit is an undermanaged, underperforming company with substantial upside opportunity and highly valuable assets. Obviously, Rock-Tenn believes this to be the case, as evidenced by Mr. Rubright’s comment on the Conference Call that “the opportunities for … investments in the Smurfit mill system are basically unlimited with very, very high paybacks.” Unlimited opportunities for projects with “very, very high paybacks”? It sounds incredibly attractive to us. These opportunities do not require a strategic partner, and an independent Smurfit would have more than sufficient cash flow to fund them. All it would take is a Board seeking to maximize shareholder value and a management team properly incentivized for long-term appreciatio n and not a short-term exit.

Smurfit’s lack of a permanent management team and prior investment constraints prevented it from eliminating some rather glaring operational inefficiencies. Smurfit’s margins have long trailed its competitors despite having a mill system which Rock-Tenn and industry consultants believe to have at worst average structural costs. Smurfit also maintains multiple corporate headquarters, further illustrating the significant level of “low hanging fruit” within the Company’s standalone cost structure. Mr. Rubright alluded to these opportunities when he stated that “perhaps the greatest value proposition in this transaction is bringing Rock-Tenn’s extremely customer focused approach to the market place; our discipline and execution; and our track record of continuous opera tional and administrative excellence .…” Customer focus, discipline and execution, and continuous operational and administrative excellence are fundamental building blocks of any successful enterprise. A competent, motivated and properly incentivized management team would surely be capable of capitalizing on these opportunities and the great value they represent to Smurfit shareholders. So why does the Board believe that a merger with a competitor is the best way for Smurfit to realize its potential?

One of the more egregious examples of leaving money “on the table” is Smurfit’s underfunded pension. While the “after tax” amount of underfunding stood at $700 million as of December 31, 2010, this number likely overstates the Company’s actual cash obligations. If, over the next two years, interest rates increase by 100 basis points and Smurfit were to contribute the $445 million currently projected, the plan would be nearly fully funded. Furthermore, if one “tax effects” this $445 million contribution, then the liability would be only $275 million, or a full $425 million less than the reported figure of $700 million. It is clear that Rock-Tenn is fully aware of this potential savings, again as evidenced by Mr. Rubright’s comments on the Conf erence Call after an analyst asked him whether there could be a substantial reduction in the pension obligation:

“You broke the code, okay? So you’re right …. If what you are suggesting happens, … mandatory funding responsibility will come down, and would we over-fund this pension plan? The answer is no.”

Significant Benefits to Rock-Tenn Should Have Led to Higher Consideration

Rock-Tenn’s asset base is 100% dependent on recycled inputs, meaning its earnings are highly vulnerable to increases in the cost of recycled fiber. Smurfit’s assets, on the other hand, are approximately 65% virgin fiber based, providing the Company with a long term structural advantage. Asian recycled capacity, mostly located in China, represents approximately 31% of total global containerboard capacity. Continued economic growth in that region should increase global competition for recycled fiber inputs, which recently reached historically high price levels. Rock-Tenn is disadvantaged relative to its domestic competitors which, like Smurfit, mainly operate virgin input assets. Mr. Rubright summarized the advantageous position of Smurfit’s assets when he stated that “the fact is United States virgin containerboard is a highly strategic global asset.” Given Rock-Tenn’s structural disadvantage and appearance as a “forced buyer” of virgin input capacity, along with the meaningful synergies that Rock-Tenn surely expects to bring to the combined company, the Board should have demanded Rock-Tenn pay a meaningfully higher premium to the market price of the Common Stock than the paltry 27% agreed to in the Merger.

* * *

For all these reasons, we believe the Merger woefully shortchanges Smurfit shareholders. Although we believe that Smurfit has the potential to thrive as a stand-alone company, we do not quarrel with the strategic rationale behind the Merger, and would support a sale of the Company, but believe that any business combination with Rock-Tenn or any other party must provide adequate consideration for the holders of Common Stock. We note that the shareholder base appears to have turned over significantly since the announcement of the Merger, with over 100 million shares having changed hands already. Fortunately, the Merger was agreed to without any shareholder lockups or voting commitments, and therefore, given the wide dispersal of the Company’s common stock, the ultimate approval by shareholders is by no means assured. We believe that there are other potential acquirers who may come forth, and we encourage any and all to do so.

We greatly regret that you, our representatives and fiduciaries, unwisely entered into a transaction without seeking competitive bids. As things stand now, we cannot support the Merger.

Sincerely,

Third Point LLC

/s/ Josh Targoff

Josh Targoff

cc: David W. Bonanno

Royal Capital Management, L.L.C.

/s/ Yale Fergang

Yale Fergang

cc: Neal Shah

Monarch Alternative Capital LP

/s/ Andrew Herenstein

Andrew Herenstein

cc: Roger Schmitz

Third Point LLC

390 Park Avenue, 19th Floor

New York, NY 10022

Royal Capital Management, L.L.C.

623 Fifth Avenue, 24th Floor

New York, NY 10022

Monarch Alternative Capital LP

535 Madison Avenue

New York, NY 10022

Source: Third Point LLC, Royal Capital Management, L.L.C, Monarch Alternative Capital LP

Media Contact:

Jeremy Fielding

Kekst and Company

(212) 521-4800