Billerud Finland has signed an agreement to acquire UPM-Kymmene‘s (UPM) packaging paper business in the Finnish towns of Pietarsaari and Tervasaari for Skr1.2bn (€130m).

The business, a wholly-owned subsidiary of Swedish kraft and sack paper maker Billerud, reported sales of Skr2bn (€220m) and EBITDA (earnings before interest, taxes, depreciation and amortisation) of nearly Skr165m (€18m) in 2011.

Billerud Finland plans to integrate the acquired units into a business focused on packaging paper. Company president and CEO Per Lindberg stated that the acquisition would reduce the firm’s pulp exposure and strengthen the offering within packaging paper.

Under the agreement, Billerud will purchase an annual pulp volume corresponding to approximately 85% of the company’s current market pulp sales output.

The deal includes paper machines in both Pietarsaari and Tervasaari; the units annually produce approximately 300,000t of packaging paper (sack/kraft) for industries such as food, retail and construction. Other activities at the mill sites will remain owned and operated by UPM.

Annual net synergies are estimated at approximately Skr30m (€3.4m), with full financial impact from the year-end of 2013.

One-off costs associated with the separation of the acquired business from UPM are estimated to be Skr22m (€2.5m) during 2012.

Since 2005, UPM has closed 14% of its paper capacity; the company said it expected to increase earnings this year following a 30% decline in underlying adjusted operating profit to €147m for the October-December period.