Ardagh Glass has built on its position as the biggest glass producer in the UK by acquiring a rival plant for £50 million (€73 million).

Ardagh, which was spun off from Ardagh plc (now South Wharf) in 2003, said yesterday that it had bought the UK glass business of packaging group Rexam.

The move comes one month after Ardagh was taken over by Caona plc, a special-purpose company controlled by some of Ardagh's largest shareholders, including businessman Paul Coulson.

The Rexam business, which is located at Barnsley in Yorkshire, will raise Ardagh's UK production capacity to more than one million tonnes of glass.

Rexam Glass Barnsley posted operating profits of £3 million last year on turnover of £101 million. The Barnsley operation had net assets of £59 million at the end of last year.

The £50 million purchase price will involve Ardagh assuming some debt. The Guernsey-based company said it would fund the deal by borrowing £35 million and drawing a further £15 million from its own cash resources.

Ardagh said the deal would allow it to draw "quality improvements and efficiency gains" from its existing Rockware glass business and the Barnsley facility.

It is expected that the acquisition will lead to job losses at the Rexam plant, which employs 700 people. Ardagh, which already has a production facility in west Yorkshire, is likely to focus initially on cutting central overheads at Barnsley.

The Barnsley plant is in good condition, having been upgraded in a £40 million investment by Rexam over the past three years.

Rexam chief executive Lars Emilson said the company had decided that a sale made sense in light of the "difficult outlook" facing the UK glass industry.

Ardagh also noted that "significant new production capacity" had been introduced in the face of "relatively static demand".

The main source of this new capacity is Seán Quinn's €364 million glass plant in Chester, which recently went into production.

Rockware is contemplating a court action to prevent the plant from operating on environmental grounds. The UK government is meanwhile planning to set up a public local inquiry into the Chester plant before the end of this year.

In a separate legal process, a small group of individuals who held shares in Ardagh Glass before the Caona takeover continue to plan an action against Ardagh directors in relation to the April deal.

The shareholders, who are represented by solicitors Donal Reilly and Collins, dispute the fairness of the €4 per share they were offered by Caona.

They have been attempting to establish the "true value" of their shares since the takeover was approved in Guernsey last month. They said yesterday that they had accepted a reduced shareholding in Caona while reserving the right to dispute the price and "recover their loss" from the Ardagh directors.