David Smith buys Spicers for pounds 95m: Purchase of envelope maker marks move away from cyclical paper making
Spicers is a business well known to Peter Williams, chief executive, and John Miller, finance director. They led the management buyout in 1988 of Reedpack, Spicers' former owners, which was sold to the Swedes in 1990 for pounds 1.04bn, netting Mr Williams a pounds 5m profit.
Mr Williams said yesterday that Svenska, which had valued Spicers too highly when it bought Reedpack, had been trying to sell it ever since. It had taken so long because Svenska had been asking an unrealistic price - originally in the region of pounds 275m.
'Spicers provides us with an opportunity not only to acquire a market leader but to do so at a price that undervalues its long-term potential.'
Since Reedpack was sold to Svenska the combined UK profits of Spicers' stationery wholesaling and manufacturing operations had more than halved from more than pounds 25m to pounds 12m. Manufacturing was barely breaking even after a vicious envelope price war led by the Swiss-owned John Dickinson, market leader and formerly part of DRG.
Spicers also ran into trouble in France where, ironically, Mr Williams first set up two regional stationery wholesalers in 1990 just before Reedpack was sold. Last year the French operation lost pounds 5m before a bad debt write-off of pounds 2.7m, and losses are still high.
Despite its recent history of collapsing profitability, Spicers is seen as a further move by Smith away from cyclical paper making, which would account for 28 per cent of a combined pounds 810m sales total against the current 44 per cent. The French problems mean that Spicers will marginally dilute earnings this year but will contribute in 1993/4. Spicers also generates surplus cash, which will help Smith in its current heavy capital spending programme on a new paper mill.
Eighteen months ago the company bought the French Kaysersberg Packaging for pounds 154m. This has proved highly successful, generating operating profits of pounds 24.2m in its first full year and masking the effects of a one-third fall in UK paper-making and packaging profits.
Smith, which is placing 31 million new shares at 305p to raise pounds 92m, estimated it made pounds 27.1m before tax and exceptionals in the year to 1 May, against pounds 24.1m. It is recommending a total dividend of 10p against 9.5p, with a final of 7.25p.
- 1 Saudi Arabia mosque bombing: Two volunteer security guards hailed as heroes for stopping Isis suicide bomber reaching worshippers
- 2 Maisie Williams has an excellent message for one confused fan
- 3 Puerto Rico, island of lost dreams: People are leaving the debt-hit territory in droves as near neighbour Cuba's star rises
- 4 Tampon tax scrapped in Canada after petition convinces conservative government
- 5 Kate Moss on the naked Calvin Klein shoot and the obsession that ended her relationship
Saudi Arabia mosque bombing: Two volunteer security guards hailed as heroes for stopping Isis suicide bomber reaching worshippers
Maisie Williams has an excellent message for one confused fan
Archaeologists discover 2,400-year-old gold bongs in Russia
Tampon tax scrapped in Canada after petition convinces conservative government
Migrants in Kos: Photos show real tragedy after British tourists complain of 'awkward' holidays
EU referendum: David Cameron's rules are a 'democratic disgrace', says French-born Scottish politician set to be denied a vote
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
A nation of inequality: How the UK is failing to feed its most vulnerable people
Australian man punched in the face for defending Muslim women from abuse on train
David Starkey 'tells Amal Clooney to shut up and stop over-promoting human rights'
EU referendum: David Cameron to deny EU migrants and under-18s the chance to vote
iJobs Money & Business
£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...
£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...
£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...
£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...