Stora Enso and AssiDoman have reached an agreement to form a new jointly owned packaging papers company called Billerud.


"During this period of consolidation, we cannot stand idle when a good opportunity arises," said Peter Mansson, AssiDoman's vice-president for investor relations.


"Rationalisation will take place, which will involve a streamlining of products, and it is likely some personnel will be affected.


"But from our perspective the company will form a new and stronger structure," he added.


Gunnar Palme, president and chief executive officer of AssiDoman, said: "The two mills we are bringing to the deal are in a strong market position, and we feel confident that the structure has competitive advantages."


The new company will comprise Stora Enso's Gruvon mill and AssiDoman's Skarblacka and Karlsborg mills, all in Sweden.


Billerud aims to be operating independently by January 2001, once approval from shareholders and the competition authorities has been received.


It will have an annual capacity of 1.2m tonnes, 2,400 employees and sales of 425m (E730m.


The name Billerud was given to the new firm by Stora Enso, and was the name of a Swedish board producer it acquired in 1984, with the Gruvon mill a part of the deal.


"We decided that kraft paper was not a core market for us, and this move will release capital for investments in our core business," said Stora Enso deputy chief executive Bjorn Hagglund.


Hagglund revealed that negotiations had been underway since August.
The shares in Billerud will be listed on the OM Stockholm Exchange, though not before 2002.


The companies will each own 50% of the shares, and while Stora Enso's long term intention is to sell its entire holding, it will sell 40% in conjunction with the listing.


Story by Andy Scott