UK-based contract manufacturer Essentra has entered a sale and purchase agreement to divest its packaging business to Austrian carton packaging supplier Mayr-Melnhof Group (MM).

The transaction will involve selling Essentra’s ESNT Packaging & Securing Solutions business in the UK and Essentra Packaging US, as well as their respective subsidiary companies.

MM will pay £312m ($382.4m) as a consideration for these companies, subject to certain adjustments.

Essentra said the divestment is in line with its previously announced strategic review of its business.

The company will use the proceeds from the sale to strengthen its balance sheet, as well as allocate a certain amount to its defined benefit pension schemes.

Essentra chief executive Paul Forman said: “The sale of Packaging marks a significant step on our journey to become a pure-play components business.

“I am sure that the business will continue to make excellent progress under the ownership of Mayr-Melnhof.”

The deal is intended to expedite MM Packaging’s strategy to grow its profitable segments, which include pharmaceutical secondary packaging.

It will also help expand the company’s footprint in the European pharmaceutical market as a manufacturer of folding boxes and leaflets.

In addition, Essentra Packaging will expand MM’s presence in the US market, particularly in the East Coast region’s pharmaceutical sector.

MM CEO Peter Oswald said: “For us, the acquisition of Essentra Packaging is a game changer in the profitable, resilient and growing market for pharmaceutical packaging.

“We have identified attractive upside potential and synergies and are well positioned to master the integration challenge.

“The merger is an excellent complement to our current position and will enable more innovations for sustainable packaging solutions in the pharmaceutical sector.

“We have great confidence in creating a promising future together with the Essentra Packaging team.”

The deal is expected to close in the fourth quarter of this year subject to standard transaction conditions being met.