Blick buys Mercury's security arm: Rights will help fund pounds 63m deal Net cash will be turned to debt

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The Independent Online
BLICK, which rents door entry and clocking-in equipment, is to acquire the time management and security business of Mercury Communications, the telephone company, for pounds 63m.

The purchase, Blick's biggest, is being partly financed through a two-for-nine rights issue at 370p a share, raising pounds 20m. Blick will initially pay pounds 41m and the balance, subject to valuation adjustments, in two annual instalments beginning in July next year.

Blick said the acquisition was complementary to its own activities in the sale and rental of time management, radio paging, public address and fire and security systems.

In effect, it is acquiring 18,500 rental contracts that are expected to generate gross revenue of about pounds 80m over the next seven years, doubling the company's customer base to about 41,000 and rental revenue to almost pounds 170m.

Although Mercury's time management and security profits are not being disclosed, City analysts estimate the division made a taxable surplus of about pounds 5m in the year to 31 March, on turnover down from pounds 20m to pounds 19m. Net assets amounted to pounds 21m as at 31 March.

The deal, which requires shareholders' approval, will turn Blick's pounds 7m net cash into debts of pounds 37m - about the same as its enlarged shareholders' funds.

However, the company believes that strong cash generation from the business will eliminate the debts over the next two-and-a-half years.

The deal is also expected to boost earnings in the current year.

Ian Scott-Gall, managing director, said: 'Based upon Blick's past experience of acquisitions of rental and maintenance businesses and own cost structure, the directors believe that the acquisition will have a positive impact on earnings.'

Blick is also estimating pre-tax profits of at least pounds 9.3m for the year ended 30 September, an 8 per cent advance on 1992.

Profit before interest and tax is estimated to rise by at least 10 per cent to pounds 8.7m while earnings per share are expected to be higher than last year.

In addition, it intends to lift the final dividend from 6.2p to 6.9p making a total of 10.2p against 9.2p.

The move was received positively by the market. Tim Steer, an analyst with Smith New Court, said: 'It looks like a good fit but Blick needed to make this acquisition to keep up its profits growth.'

The shares, which have been unsettled by a spate of damaging rumours, eased back 5p to 440p. They have fallen from a 1993 high of 575p. The company was forced to announce that it was negotiating a big acquisition last week.