Jefferson Smurfit Group is exchanging its 50 per cent ownership in Canadian corrugated producer Smurfit MBI and paying €185 million for the European packaging interests of its former associate, Smurfit-Stone Container Corporation (SSCC).

These include Hamburg-based Europa Carton, one of the largest European corrugated producers, which comprises two paperboard mills, 11 corrugated and five recycling facilities in Germany.

Other operations being acquired by Smurfit include a containerboard mill and three corrugated facilities in Spain, four in Belgium, one in France and one in the Netherlands.

Total mill production last year was around 450,000 tonnes of containerboard and boxboard. Sales were about $630 million (€582 million) for those businesses, which employ about 3,200 workers.

Smurfit chief executive Mr Gary McGann said the transaction would sharpen the group's regional focus and make it a significant player in markets like Germany and Belgium where it is currently under-represented.

"The transaction brings substantial mill and corrugated capacity in markets where Jefferson Smurfit Group is not a significant player," he said.

Following the deal, Smurfit's operations will be focused on Europe and Latin America with the exception of a newsprint mill in California and niche papermaker Smurfit Munksjo Packaging, west of Boston.

The transaction, which Smurfit said would be immediately accretive to its earnings, is expected to close in the first quarter.

It is subject to several conditions including European and Canadian regulatory approval.

Smurfit-Stone will take full control of Ontario-based Smurfit-MBI, Canada's second-largest maker of corrugated containers with sales of about $430 million last year. The business has about 2,500 employees and 15 plants in Canada.

As a result of the deal, Smurfit-Stone will end its manufacturing presence in Europe.

The Chicago-based company, which has a number of Irish shareholders since Smurfit Group spun off its 29 per cent stake in the US company last year, will record a loss on exiting the European business, of $40 million, or 16 cents per share, in 2002.

The loss results solely from a provision for taxes on the disposition, the company, which is due to release its fourth quarter results today, said.

Smurfit-Stone said the exchange was "a natural step for both Smurfit-Stone and Jefferson Smurfit Group following last September's privatisation of Smurfit.

The company was taken private by Madison Dearborn in a $3.7 billion deal.