Paper and pulp group, Mondi, is set to acquire bags and kraft paper unit of the US-based Graphic Packaging International for $105 million in debt and cash, it said on Tuesday.

David Hathorn, the CEO of London and Johannesburg Stock Exchange (JSE)-listed Mondi Group said the merger of the two businesses will create a critical bags player in North America and extend Mondi’s international footmark in this market.

Hathorn said Mondi, in view of this merger, is set to proffer creative solutions for the firm’s increasing client base.

“Synergies expected from the acquisition…will ensure that the combined business delivers strongly,” Hawthorn said.

Graphic Packaging is one of the biggest players in the in the production and distribution of kraft paper and bags in the US, the world’s biggest economy.

It has a kraft paper mill positioned in Pine Bluff Arkansas, which has the capacity to produce 135 thousand tonnes a year. It also has nine bags factories throughout the US.

In the year to end-March, the firm posted unaudited pro forma sales of about $437 million.

Mondi, a global packaging and paper operator, employs around 24,000 people in production facilities across 31 countries. It has important operations in central Europe, Russia, the Americas and South Africa.