The deal is subject to a number of conditions, including competition approval from the European Union.

JSG chief executive Gary McGann described the packaging market as a "challenging operating environment" and said that the deal would benefit both firms' shareholders,

Preliminary talks between the two groups started in May this year.

The purchase will be financed through the issue of shares by JSG and a cash payment of approximately 202m (300m) and a 50m subordinated promissory note to Kappa's shareholders.

JSG's existing shareholders would own 58.3% of the combined company, while Kappa's would own 41.7%. A new credit facility will also be established.

Kappa has a workforce of around 16,000 employees, with sales of 2bn, and 126 production sites in 20 countries. It produces containerboard, solid board and solid board packaging, corrugated packaging and speciality board.

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

Story by Andy Scott