Jefferson Smurfit is to sell its Swedish speciality paper business, Munksjo, to the Scandinavian buyout group EQT for around €450 million.

Smurfit will use the proceeds of the sale, which is subject to the customary regulatory approvals, to pay down its €2.9 billion debt.

Chief executive Mr Gary McGann said cutting the debt burden, run up when the company was acquired by Madison Dearborn two years ago, left it with a lot of options which were currently being considered.

Among the options open to the group in the next couple of years are a return to the stock market through an IPO, sale to a private equity or trade buyer, or a refinancing. However, Mr McGann noted yesterday that the company's debt levels were still too high to go down the IPO route.

The Munksjo assets being sold comprise pulp, decor paper and speciality paper businesses and had estimated sales of around €480 million this year.

Smurfit recently agreed to sell its Munksjo Tissue business to Svenska Cellullosa for around €28 million but retains the Munksjo container board and corrugated assets, which are located mainly in Norway, Sweden and Poland.

Last June, the company, which is now owned by US venture capital group Madison Dearborn, retained UBS Investment Bank to advise on the sale of Munksjo and said it expected to conclude a deal before the end of the year.

Other interested bidders for the Scandinavian paper specialist included a consortium of CVC and Nordic Capital and Electra Partners Europe.

Smurfit acquired complete control of the Swedish group two years ago, shortly before it was bought by Madison Dearborn in a $3.8 billion (€3 billion) leveraged buyout. The deal left Smurfit with substantial debts and it has since sold off a number of non-core businesses in a bid to reduce its indebtedness.