US-based diversified packaging company Sonoco has signed a definitive agreement to acquire Skjern, a privately owned paper manufacturer from Denmark.

The all-cash transaction is valued at approximately kr675m ($88m).

Founded in 1965, Skjern produces high-grade paperboard from fully recycled paper for use in manufacturing rigid paper containers, tubes and cores among other products.

The company expects to generate $50m in annual sales this year.

To improve its sustainability, Skjern has programmes to reduce its carbon emissions, while its operations are powered by a biomass boiler, making them less reliant on natural gas.

The acquisition is intended to increase Sonoco’s production capacity for customers and its converting operations across Europe and its bordering regions.

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It is expected to close in the fourth quarter of fiscal 2022 (FY22) subject to customary closing conditions.

Sonoco expects the deal to be immediately accretive to both its earnings per share and cash flow.

Sonoco president and CEO Howard Coker said: “This acquisition builds on Sonoco’s previously articulated strategy to invest in our core businesses while capitalising on the growing market for sustainable paper and packaging products in Europe.

“Skjern has a strong reputation for high-quality output from efficient and low emission operations, which aligns well with Sonoco’s overall commitment to a circular economy and the reduction of greenhouse gases.

“With this acquisition, Sonoco is better positioned to be a trusted provider to new and existing customers and further accelerate organic growth in Europe.

“We warmly welcome the Skjern team to the Sonoco family.”

Based in South Carolina, Sonoco provides consumer and industrial packaging and products for brands in 85 countries.

The company employs around 22,000 colleagues and registered net sales of around $5.6bn last year.

In December last year, it agreed to acquire sustainable metal packaging manufacturer Ball Metalpack for $1.35bn in cash.