A few months ago we highlighted some of the hedge fund ownership of Smurfit-Stone's post re org equity as determined from the HD function on Bloomberg. With that, I am sure all my readers know that Smurfit-Stone has agreed to be acquired by Rock-Tenn. Yesterday, three prominent distressed / event-driven funds sent a letter to SSCC's Board of Directors calling the acquisition price essentially a sham.
"Just last week, the company filed an 8-K with updated information about the Dec. 31, 2010 resignation of Steven J. Klinger from his roles as President, Chief Operating Officer, and director. The resignation was surprising at first, given the fact that the company had just inked an amended employment agreement with Klinger last summer following its emergence from bankruptcy. But when we dug deeper, we learned that Klinger and the company had previously agreed that within 30 days after Smurfit-Stone got notice that its CEO-at-the-time intended to leave, the company would consider promoting Klinger to the roles of President, CEO, and (potentially) Chairman of the Board. We know that Moore is expected to retire sometime in the next few months, and yet the board did not tap Klinger for the CEO post.Although Klinger officially resigned, he will be sticking around a bit longer because of an agreement that he and Smurfit-Stone made on New Year's Eve. Per that arrangement, Klinger agreed to work as a consultant from New Year's Day through March 31, 2011 in exchange for the tidy sum of $150,000 per month. He's to perform whatever consulting services the CEO and the Board "reasonably request" him to render; the document doesn't offer any further details. But the agreement appears to be about more than just the money. It also states that when the Consultancy Agreement expires on March 31, 2011, Klinger's unvested options and RSUs will remain outstanding for six more months. If a change in control occurs during that window of time, Klinger's awards will immediately vest.Given the short-term of the consulting agreement and the specific conditions which benefit Klinger if a change in control occurs by the end of September, we think it's possible that negotiations for a sale are occurring."