According to a press release from Paloma, the shareholders will take a vote on the recapitalisation in which Abris is offering EUR 3.30 a share on 5 January.

It said Abris was selected in a competitive procedure that also attracted international strategic and financial investors, and was also endorsed by the majority owner, Slovenian Sovereign Holding (SSH).

SSH, which holds 71% in Paloma, will back the recapitalisation at the shareholders' meeting, unless a counter-proposal is made prior or at the meeting trumping conditions offered by Abris.

SSH announced that in a press release in which it said an agreement to that effect had been signed with PPRS Holdings Limited, through which Abris would conduct the recapitalisation.

If any of the existing shareholders or prospective investors is willing to offer a higher price, SSH will examine the proposal and take it into consideration if backed with a credible proof of financing, it said.

After acquiring fresh shares and consequently a majority stake in Paloma, the Polish fund will need to publish a takeover bid for the remaining shares.

Paloma CEO Tadej Gosak commented that the capital injection was vital for the company in that "it acquires the capital for further development", and that the "best possible bid was attained for the shareholders".

He described Abris as a respectful investor with rich experience of investment in industries ranging from animal fodder to waste management, paper and cellulose, fashion, food, logistics and financial services.

The fresh capital would enable Paloma to continue with restructuring and to launch a new development cycle, to make urgent investment in production capacities, energy efficiency, modernisation and better working conditions.

This was echoed by SSH, which said that "outdated technology and worn-out production equipment would jeopardise Paloma's operations without a recapitalisation".

The release from the company also said that last year's performance was the best in the past five years with sales up by 3% to EUR 87m and a net profit just shy of EUR 3.5m.

Although operating results in the first three quarters of the year were below targets, own-brand market shares in strategic markets had been increased and the company expects to end the year in the black.

Abris Capital Partners is a Warsaw-based private equity fund manager focused on mid-market opportunities in Central and Eastern Europe. It has raised over EUR 770m in capital.

The fund is backed by various leading global investment organisations, including corporate and public pension funds, financial institutions, insurance companies and US university trust funds.

Along with the recapitalisation, Paloma is to get a EUR 4.5m loan from the European Bank for Reconstruction and Development in the coming years.

Paloma is the eighth on the list of 15 state enterprises slated for privatisation in 2013 to be sold after aircraft maintenance firm Adria Airways Tehnika was sold earlier this week.

Today's signing caps years of search for a strategic partner and several failed attempts to privatise the company.

Based in the village of Sladki Vrh near the Slovenian border with Austria, Paloma employs some 700 people and puts out some 70,000 tonnes of tissue paper a year. It is present in more than 30 markets.

Building on a more than 140-year tradition, Paloma is one of the best known brands in the area of former Yugoslavia.