Erskine agrees to Alco bid: Shake-up in office equipment sector as Americans buy photocopier distributor

ERSKINE HOUSE, the Anglo-American photocopier distributor, yesterday agreed a pounds 67m bid from Alco Standard of the US. Shares in Erskine jumped 54p to 89p to almost match the 90p cash offer after Alco picked up 22 per cent of the equity in the market.

Erskine's shares fell to 27p in March after the company warned that it would not pay a final dividend for the year to March. Erskine has yet to disclose full-year figures but analysts have forecast a drop from last year's pounds 12.7m pre-tax profits to about pounds 7m.

Profits have been in decline since 1989. Until then, under the leadership of Brian McGillivray, chairman, Erskine House had grown rapidly through acquisitions.

Once trading turned down, the market focused on debt worries, bad publicity for the industry as a whole, and rumours about directors selling their stakes. The shares fell from 240p to 30p in a year and have never really recovered.

Ray Mundt, chairman and chief executive of Alco, denied that paying 64 times last year's expected earnings was over-generous. 'The UK, which is the second-largest office equipment market in Europe, is a logical next step for Alco and Erskine House is an ideal fit.'

Alco is the second-largest office products distributor in the US after Xerox, with sales of nearly dollars 5bn and a market capitalisation of dollars 2.2bn. Since the mid-1950s the company has grown through more than 300 acquisitions.

It also owns 50 per cent of IMM, the largest distributor in Germany, Europe's largest market for photocopiers. Erskine House has operations in Germany and in the US, which accounts for more than 60 per cent of sales.

Mr McGillivray, whose shareholding is worth more than pounds 1m, said the company had seen a marked improvement in trading since the final quarter of 1992. He will leave the company after the change of ownership.

The photocopier industry is being investigated by the Office of Fair Trading, which is concerned about sharp sales practices and unfair contracts. Mr Mundt said he was unconcerned about possible repercussions from the inquiry.

(Photograph omitted)