Jefferson Smurfit confirmed that talks were underway, but declined to comment further.

The deal would create significant consolidation in the European paper sector.

Dutch paper and packaging group Kappa has a workforce of 16,000 employees, with sales of 2bn (EUR 3bn), and 126 production sites in 20 countries. It produces containerboard, solid board and solid board packaging, corrugated packaging and graphic and speciality board.

Jefferson Smurfit employs 30,000 staff, with sales of 3.2bn. The containerboard, corrugated containers and packaging product manufacturer owns 43 mills, 186 converting plants, 26 reclamation plants and a further 30 worldwide production facilities.

The Irish packaging group was bought by US-based private equity firm Madison Dearborn Partners in a 2.1bn deal in 2002.

story by Andy Scott