Essentra is selling its Packaging division to Austrian cartonboard and folding cartons specialist Mayr-Melnhof Group in a deal worth over £300m.

In a statement released today (24 June), the same day the two businesses entered a Sale and Purchase Agreement, Essentra said the disposal of ESNT Packaging & Securing Solutions Ltd and Essentra Packaging US Inc and their respective subsidiary companies was in line with its previously announced strategic review.

The transaction is for a cash consideration of £312m on a cash-free, debt-free basis and is subject to customary adjustments.

It is subject to various conditions, including a shareholder vote for Essentra, and is set to complete in Q4 2022.

Essentra said its board intends to use the proceeds to further strengthen its balance sheet and make a small contribution to its defined benefit pension schemes.

Meanwhile, the strategic review of Essentra’s Filters division, a global independent cigarette filter supplier, is “progressing in line with expectations” and, following the conclusion of this review, the board said it will determine the best use of cash on the company's balance sheet, “taking into consideration the imperative of maximising shareholder value after allowing for sufficient flexibility of the Components business to pursue value creating opportunities”.

Essentra Packaging operates 23 facilities across three geographic regions. The division’s products include cartons, leaflets, self-adhesive labels, and printed foils used in blister packs.

Essentra chief executive Paul Forman said: “The sale of Packaging marks a significant step on our journey to become a pure play Components business. A substantial amount of work has gone into improving the Packaging division over the last few years and I would like to thank all colleagues for their commitment and hard work whilst part of Essentra.

“I wish them all the best for the future. I am sure that the business will continue to make excellent progress under the ownership of Mayr-Melnhof.”

He added: “Essentra has a bright future as a global leading manufacturer and distributor of components with a clear strategy and significant opportunities to accelerate growth and expand market share. This transaction will enhance Essentra’s balance sheet strength and enable the group to participate in further investment activity.”

Prior to the completion of the transaction, Essentra will undertake a group reorganisation to achieve the separation of the Packaging division from the remainder of the group by transferring certain assets that are currently part of Packaging to the retained Essentra group, and transferring certain other assets that are currently part of the Essentra group to Packaging.

The transaction excludes Essentra Packaging’s business in India. While not material to the group at less than 1% of revenue, the company will be reviewing options for this business moving forward.

Mayr-Melnhof Group, which employs around 13,000 staff excluding Essentra Packaging and has sales of approximately €4bn (£3.43bn), said the deal would complement its current positions in the Nordics through recently acquired Eson Pac and its legacy business in France.

Mayr-Melnhof CEO Peter Oswald said: “For us, the acquisition of Essentra Packaging is a game-changer in the profitable, resilient and growing pharma packaging market. We have identified attractive upside potential and synergies and are well-prepared to take on the integration challenge.

“With an excellent fit to our current position, our new combined entity will enable more innovation for sustainable pharma packaging solutions. We have great confidence in shaping a promising common future together with the team of Essentra Packaging.”

Headquartered in Kidlington, Oxford, £960m-turnover Essentra’s global network extends to 34 countries and includes 8,327 employees, 47 principal manufacturing facilities, 28 sales and distribution operations, and two research and development centres.

With around 3,500 staff, the Packaging division has sales of circa-£370m. The group’s Packaging sites in the UK are located in Bangor, Bradford, Newmarket, and Newport. It also has a tear tapes operation in Nottingham.

Essentra’s share price was down by 0.55% on yesterday’s close at the time of writing on Friday afternoon at 271p.

Essentra recently became the first UK packaging printer to adopt Landa’s Nanographic digital printing technology after investing in an S10 press at its Bradford site.