The Scottish papermaker announced earlier this month that it was seeking urgent re-capitalisation and refinancing following breaches of its banking covenants with the Royal Bank of Scotland.

Klippan director and Inveresk non-executive chairman Jan Bernander said it was still his intention to merge the companies, but only once the refinancing issue was out of the way. "My intention remains the same, but it's more convenient to end talks now and resume them later," said Bernander.

Inveresk's two remaining mills, St Cuthbert's and Carrongrove, were both profitable according to Bernander, who said the company was in fairly good shape going forward.

Klippan stepped in to buy Inveresk's Caldwells mill in a 2m deal at the beginning of November, in a move that saw Bernander and fellow Klippan director Alan Walker elected to Inveresk's board and the exit of executive chairman Ken Minton.

Story by Andy Scott