Plastics Capital plc Acquires Synpac Limited

Plastics Capital, the niche plastics products group, announces the acquisition of Synpac Limited for a maximum cash consideration of £3.1 million, on a cash and debt-free basis, to be satisfied from existing debt facilities. The Acquisition is expected to be earnings enhancing in the first full financial year following completion.

Acquisition Highlights

• Synpac is a specialist manufacturer of vacuum bags and pouches for the food processing industry
• Complementary products and customers with the Company's existing film packaging business
• Cross-selling opportunities and cost synergies for the enlarged packaging business
• Normalised sustainable EBITDA estimated by Directors to be £0.6m
• £2.79 million cash paid on completion and a further £0.31 million is payable after 12 months
• Total cash consideration will be funded through increased debt facilities provided by Barclays Bank, as announced 4 July 2016

About Synpac

Established in 1984 and based in Hessle, Yorkshire, Synpac is a specialist manufacturer of high barrier, flexible packaging solutions, especially vacuum bags and pouches, for the food processing industry.  

The Directors believe that Synpac has a loyal customer base with high levels of recurring business due to excellent service and quality standards that have been maintained over many years.  As such, they believe it fits very well with the Company's Films Division comprising Flexipol Packaging Limited ("Flexipol") and Palagan Limited ("Palagan").  Flexipol, in particular, is a manufacturer of high barrier flexible packaging solutions for the food industry.

In the financial year ended 31 May 2015, Synpac generated revenues of £4.4 million and statutory profit before taxation of £0.8 million.  The Directors estimate that the normalised sustainable EBITDA of Synpac is circa £0.6 million, after making suitable adjustment for the significant weakening of sterling post the recent referendum to leave the EU.

As at May 2015, Synpac had net assets of £3.0 million, including cash of £1.8 million.  The fixed assets on Synpac's balance sheet included its factory and head office which was last valued at £0.7 million, which will not form part of the transaction.

Acquisition Rationale

The Acquisition is in-line with Plastics Capital's stated strategy to grow shareholder value through strategic acquisitions of related specialist plastics products businesses. The business has been followed by Plastics Capital for the last three years and is being acquired from Synpac's founder who will be retiring after an agreed handover period.

The Directors therefore believe that there will be minimal integration risk and the enlarged packaging business can deliver organic revenue growth in addition to increasing the operating margins of the enlarged packaging business post the Acquisition.

Transaction Highlights

The maximum consideration payable pursuant to the Acquisition is £3.1 million comprising:

• £2.79 million payable in cash on completion; and
• £0.31 million of deferred consideration payable 12 months following completion, subject to there being no warranty claims.

The Acquisition will be satisfied in cash through use of the recently extended existing debt facility with Barclays Bank plc.

Faisal Rahmatallah, Chairman of Plastics Capital, commented: "We are very pleased to announce the acquisition of Synpac Limited. Synpac is a business that meets our acquisition criteria, namely specialty products, high recurring revenues with loyal customers, limited competition and healthy financial performance. It is complementary to our other Films Division businesses and this should enable us to achieve significant synergies in due course through cross selling, operational efficiencies and cost savings."