Manufacturer buys rival in £42m deal

Tissue manufacturer Accrol Group has agreed a £41.8m deal to buy the Leicester Tissue Company (LTC) and raised most of the purchase price in an overnight share placing.

The acquisition will increase Accrol’s share of the UK’s £1.7bn retail tissue market to approximately 16% and consolidate its position in the private label retail tissue market.

The combined group will have a turnover of more than £160m and employ nearly 500 people at five sites in Lancashire and Leicester.

LTC was founded in 2014 by the Tejani family, which had previously built the Leicester Paper Company (LPC) Group into Europe’s largest independent paper manufacturer before selling in 2010.

It supplies private label and branded toilet roll and kitchen towel to UK customers, including major supermarket multiples and value retailers.

LTC has annual sales of £28m and generated adjusted EBITDA – which is a measure of operational profitability – of £4.5m in the year to September.

Blackburn-based Accrol expects to generate savings of more than £1m from cost synergies. Accrol currently delivers almost half of its sales to places south of LTC’s Leicester site which it says “provides a significant opportunity for logistical synergies”.

It will also “defer” a £5m investment in a new line that had been planned for early next year.

The deal will see £35m paid on completion and up to £6.8m of deferred consideration paid next year, which relates to EBITDA contribution on revenue generated from specific new contracts.

Accrol’s executive chairman Dan Wright said the deal was “fully aligned” with its Brand Killers growth strategy.

He said: “We have been very selective about Accrol’s first acquisition, and LTC’s scale and quality demonstrates the ambitions we have for the group.

“With c.£25m having been invested in the LTC business since its foundation in 2014, it is equipped with top quality machines and has highly capable day-to-day operational leadership, on which we can build.”

Accrol raised £38.5m in an oversubscribed placing and has added on an open offer that could add an additional £4.1m.

The share placing was executed at 44p per share – just 1.1% below its previous close and more than 10% above the levels seen earlier this year before the impact of Covid-19.

In September, Accrol reported strong progress in its turnaround strategy with annual revenues up 13% to £135m while losses fell by 87% to £1.9m.