UK-based sustainable packaging company DS Smith has agreed to divest its De Hoop paper mill in the Netherlands to Dutch corrugated packaging supplier De Jong Packaging.

Located in Eerbeek, Netherlands, the paper mill manufactures different paper grades of recycled paper, with an annual capacity of 370,000t.

The deal is valued at a £43m ($59m) cash consideration.

De Jong Packaging Group CEO Ad Smit said: “The demand for corrugated packaging is accelerating and the acquisition fits in the strategy to be an integrated packaging company.

“We are pleased to have reached this agreement for the De Hoop paper mill. De Hoop is a great mill with a lot of potential which we would like to develop.”

DS Smith will continue to buy and supply “a certain amount” of containerboard and fibre to and from the paper mill.

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The divestiture is in line with the company’s strategy to have a ‘short paper’ position in Northern Europe.

It will use the proceeds from the deal to offset investments it has made in its packaging capacity this year, which include new greenfield corrugated box plants in Italy and Poland and an expansion of its packaging facility in Arnstadt, Germany.

DS Smith chief executive Miles Roberts said: “While this represents another step to further realign our network of paper mills with the needs of our fast-moving consumer goods (FMCG) and e-commerce-led sustainable packaging strategy, we have also found a good home for De Hoop in De Jong Packaging.”

The deal is expected to close in the third quarter of this year subject to customary closing conditions, including a works council consultation.

In May, DS Smith announced a planned £100m ($137m) investment in research and development (R&D) over five years to help the packaging industry move towards a circular economy.