The buyout will be funded through DS Smiths existing debt facilities and a new loan facility of 140m from The Royal Bank of Scotland.

DS Smith aims to reduce the new debt by using the proceeds of a fully underwritten rights issue in order to raise in the region of 71m.

Initially we will be buying the company with debt, but we wanted to keep the balance sheet strong, hence the rights issue, said a company spokesman.

Linpac Containers Group has six plants in Louth, Featherstone, Devizes, Glasgow, Rawcliffe and Erith.

It converts around 265,00 tonnes of paper per annum and produces 550m m2 of corrugated packaging material.

DS Smith has 25 factories in the UK and 12 factories in Europe, and manufactures some 1.1bn m2 per annum of corrugated packaging.

The acquisition will be put to DS Smiths shareholders and a decision is expected at an EGM on 22 March and if approved should aim to complete the deal by the end of March.

The spokesman said the combined company would increase staff numbers to 3,600, some 1,300 of which would come from Linpac.

DS Smith expects to make savings of 14.5m in its second year, and is reviewing the business which could see a reduction in sites and staffing levels. No announcement will be made until the process is complete.

The acquisition of Linpac will increase DS Smiths market share in the corrugated sector to 24%, effectively putting it at number one market leader ahead of Mondi.

by Andy Scott