Recycled packaging maker DS Smith Plc agreed to buy Spanish company Grupo Lantero's corrugated boxes business to expand its market share in Spain.
With the 190-million-euro ($213 million) deal, about 5 percent of DS Smith's revenue would come from Spain compared with less than 1 percent at the end of fiscal 2015.
The deal, DS Smith's fifth in a year, also builds on its acquisition of Spanish corrugated board producer Andopak in November.
"Going forward, we have a starting run rate on turnover of towards 200 million pounds with the acquisitions we have done in Spain, so that's a very significant increase," Chief Executive Miles Roberts told Reuters.
Better consumer awareness and a switch to recyclable packaging by FMCG companies, along with growth in online sales and e-commerce, is pushing up demand for fibre-based cardboard boxes in Europe.
The acquisition, which includes operations in which DS Smith currently holds a minority interest, would give the company an about 10 percent share of the Spanish cardboard corrugated packaging market.
"Up until six months ago, we did not have a presence in the market (Spain), we didn't have any manufacturing capability there ... Given the pull from our customers to supply them across Europe, we've entered that market," Roberts said.
Grupo Lantero's corrugated boxes business has a strong focus on the FMCG sector and operates out of seven sites across Spain, which is also Europe's fourth biggest market for packaging products.
"With about 14 percent European corrugated market share in a highly fragmented EU market, we expect further DS Smith M&A ... we believe DS Smith could self-finance up to 1 billion pounds of accretive M&A," Jefferies analysts said in a note.
Shares in the company were up 3 percent at 387 pence at 0933 GMT. The stock was among the top percentage gainers on the FTSE-250 midcap index.
DS Smith, whose customers include Procter & Gamble Co , Nestle SA and Unilever Plc, reported a pretax profit of 200 million pounds ($314 million) for the year ended April 30, up 20 percent from a year earlier.
However, reported revenue fell 5 percent to 3.82 billion pounds, mainly due to the impact of the weaker euro. On a constant currency basis, revenue rose 1 percent.
DS Smith said it raised its medium-term margin target by 100 basis points, prompted by strong volume growth and a rise in margins.