Macfarlane seeking more targets after £7.5m swoop

Lord Macfarlane, former hairman of the Macfarlane Group and Professor John Ward at the Macfarlane packaging plant in Glasgow in 1998. Picture: TSPL

The Glasgow-based group, which last month unveiled a 25 per cent slide in half-year profits, said the deal to buy Network Packaging would help to boost its presence in the fast-growing online retail sector.

Chief executive Peter Atkinson told The Scotsman that he had been charting the Wolverhampton-based firm’s progress “for quite a while and for us it was a really good opportunity”.

He added: “Our focus over the last two or three years has been around internet retailers and third-party logistics, and that’s precisely the sectors in which Network Packaging also operates. We have complementary skills in those areas and a number of complementary customer relationships as well.”

The cash and shares acquisition follows the takeover in May of Reading-headquartered rival Lane Packaging for up to £1.1m, and Atkinson said he was keen to secure another deal in the near future, setting his sights on UK firms with a turnover of between £3m and £12m.

He said: “We would hope to complete another acquisition in the first half of next year. We’re now moving into a very busy period as retailers ramp up for Christmas, so we’ll probably put a hold on things as we run through to the end of the year.”

Network Packaging, set up in 1997, employs 25 people at its Wolverhampton site and Atkinson said it was “absolutely critical” for the local workforce to be retained to hold on to existing customers.

The deal will take the total headcount at Macfarlane to about 750 and will be partly funded via an oversubscribed share placing to raise £3m before expenses.

Shareholders will vote on the placing at a meeting to be held in Coventry at the start of next month, although the group has the financial strength to have completed the deal without tapping investors for cash.

Macfarlane recently negotiated a £20m bank facility, replacing a previous £11m package, and Atkinson said: “The reason for the placing was to give us more firepower with the support of institutional shareholders”.

The firm is paying £4.9m up front for Network, of which £4.6m will be in cash and the rest paid in shares. A further payment of up to £2.6m will be made in two instalments, in the final quarters of next year and 2016, subject to certain trading targets being met.

Analysts at house broker Arden Partners said: “The profile of Network resembles a small version of Macfarlane, with 2013 revenues of £7.8m achieved both through third-party logistics companies and a significant presence with internet retailers, with both being about 30 per cent of Network’s revenue.

Macfarlane last month said pre-tax profits fell to £1.2m in the first half, from £1.6m a year earlier, as pressure on margins offset a 3 per cent rise in sales to £70.1m.