Macfarlane boosts market share with £16.75m takeover

● Glasgow group strengthens packaging interests with largest-ever acquisition

Scottish packaging firm Macfarlane Group further bolstered its significant market share with another deal yesterday in an acquisition spree that has seen it acquire seven companies in the past three years.

In its biggest-ever transaction, Macfarlane is acquiring Greenwood Stock Boxes and sister company Nottingham Recycling in a cash and shares deal worth up to £16.75 million.

The acquisition comes as Glasgow-based Macfarlane looks to continue to strengthen its position in a fragmented market for protective packaging, which is seeing strong demand from the growth of e-commerce.

The company also revealed that shareholders had provided a vote of confidence in the move, with the firm raising £8m in a significantly oversubscribed placing to help fund it.

Macfarlane chief executive Peter Atkinson described the acquisition as “another major step forward in our growth strategy”.

He said: “Greenwoods is a long-established, high-quality business which has successfully developed into attractive markets with good growth potential”.

The transaction includes an initial consideration of £13.5m in shares and cash. A further sum of up to £3.25m will be paid if certain trading targets are met in the 12 months after the acquisition.

Macfarlane said that it expects the acquisition to be earnings-enhancing in the first full year of ownership.

During the financial year to 30 April, the Greenwood group achieved revenues of approximately £14.1m and earnings before interest and tax of about £1.6m.

Analyst Ben Thefaut of house broker Arden said there continued to be signficant opportunities for Macfarlane which he described as the “lead consolidator” in the protective packaging distribution sector.

Following the latest deal, he estimates Macfarlane has around a 24 per cent market share – more than double that of its nearest rival. Thefaut said there are another 100 packaging distributors with revenues of under £10m in the UK which presents a “favourable corporate landscape” for the company to target further acquisitions.

“Current trading is in line with expectations and we are confident that Macfarlane can outperform market growth,” Thefaut added.

Greenwoods operates from Nottinghamandmeltonmowbray, and primarily distributes corrugated packaging with a particular focus on the clothing retail sector. It also operates a small manufacturing site, and a collection and baling service for waste corrugate.

Last month Macfarlane had hinted another deal was in the offing as it posted a surge in first-half profits, up by 26.6 per cent to £2.5m.

Other acquisitions made by the firm include last year’s purchase of the packaging arm of fellow Glasgow business, Edward Mcneil.