Salvesen buys Swift for pounds 80m: Acquisition will be boost for group's position in industrial distribution
The deal also provides a bonanza for Prudential Venture Managers and 3i, which backed a management buyout of Swift from the troubled LEP Group 18 months ago. The managers paid just pounds 26m for the business, which made operating profits of pounds 6.5m last year.
Swift provides specialist distribution services, via on-line computers, to industrial customers such as Ford, General Motors, Lucas and Mobil Oil. It has 22 depots, 700 vehicles and 1,500 employees.
Chris Masters, Salvesen's chief executive, said Swift would complement the group's existing food distribution business, but would retain its separate identity and its current management. 'We don't expect any great benefits of synergy,' he said. 'It is already a lean and well-run business that is growing fast.
'The attraction is that the stability it will have by being part of a bigger group will help maintain its growth, and it will be able to develop in Europe through our existing network there.'
He said he was comfortable with the price and did not believe the purchase would dilute earnings. The pounds 80.4m cash payment will be met out of Salvesen's existing resources. The group will also assume pounds 3.5m of debt.
The deal will push Salvesen's gearing to about 50 per cent at the year-end, but Dr Masters pointed out that interest cover would still be well into double figures.
Salvesen's shares rose 3p to 366p on news of the deal.
Bob Carpenter, analyst at Kleinwort Benson, said: 'This has got to be a pretty sensible deal, as it gives them another leg to add to the food distribution business. That arm is well run, but is not in a position to grow greatly in the UK.
'This acquisition will give them an opportunity to extend the business and take on a number of new accounts. For them, it is a quantum leap in UK non-food distribution.'
Dr Masters said Salvesen had been looking at the sector for about two years. 'We spent a lot of time with Swift before putting in a bid, and we're very impressed with the quality of the management, who are all staying with the business,' he said.
In June Salvesen reported a 64 per cent rise in pre-tax profits to pounds 75.9m for the year to March. This was distorted by an FRS3 accounting change that lopped pounds 19.1m off the previous year's figures. However, profits and earnings did rise 11 per cent, excluding the change. Kleinwort Benson forecasts profits of pounds 83m this year, giving earnings per share of 21p.
Bottom Line, page 32
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