DUBLIN-BASED packaging company Smurfit Kappa has confirmed plans to swap certain assets with Italy’s Mondi Group.

The deal was flagged by the company on January 27th, when it confirmed talks were underway.

Smurfit will acquire Mondi’s corrugated operations in the UK while Mondi will purchase the Irish company’s western European sack-converting business.

The total cash cost to Smurfit of the asset swap is €51 million. Smurfit said the deal was conditional on “customary completion conditions”.

The UK’s Office of Fair Trading cleared Smurfit’s takeover of Mondi’s British assets last Friday. These comprise three corrugated box plants. Smurfit is acquiring the businesses for a consideration of €43 million on a cash and debt-free basis.

The three facilities reported a combined 2009 full-year earnings before interest, tax, depreciation and amortisation (Ebitda) of €8 million and a pretax profit of €2 million.

Smurfit is disposing of its western European sack-converting operations, which comprise four plants in France, three in Spain, and one in Italy, as well as a number of sales offices. In 2009, these reported an Ebitda loss of €4.4 million and a loss before tax of €12.6 million.

On disposal, Smurfit will incur exceptional write-offs of about €30 million, including a net cash cost of €8 million.

Commenting on the swap transaction, Smurfit chief executive Gary McGann said the deal enhances the “efficiency of its integrated system in the increasingly attractive UK market”.

Goodbody Stockbrokers analyst Robert Eason described it as a “good deal” for Smurfit. “They’re paying €51 million for a € 12.5 million incremental profit change . . . it’s four times Ebitda, which sounds like a good deal.”

Mr Eason said the transaction would boost Smurfit’s UK market share from its current 13 per cent level to about 20 per cent.