IG Design Group has agreed to take over its US rival Impact Innovations in a £56.5m deal that will create “a new industry leader” in the gifting business.
Bedfordshire-headquartered IG Design Group, known as Design Group, also announced a £50m share placing at the same time, of which £31.9m will be used to partially satisfy the funding requirements of the takeover.
Design Group shares rose by just over 10% to 572.40p, a new 52-week high, following the announcement.
Impact Innovations manufactures gift packaging and seasonal decor items such as window clings and bunting for a raft of major US retailers, including Walmart, Target and Shopko. Walmart is its biggest customer.
The business had sales of $155.9m (£121m) last year and posted underlying EBITDA of $15m. It has manufacturing operations in Minnesota and Tennessee, with additional facilities in China.
Design Group is acquiring the business on a debt- and cash-free basis for £56.5m, but the total funding requirement is £84.4m in order to cover working capital and other adjustments as the Impact business is being acquired during its peak period. Design Group will extend its existing debt facilities to cover the additional overhead.
Chief executive Paul Fineman said the deal would “transform the overall group”.
“The combination of Design Group and Impact Innovations creates a business that doubles in scale in the Americas and generates both synergies and fast payback,” he stated.
“We will provide customers with an even more compelling one-stop shop solution and become a new industry leader in the gifting business.”
Fineman also said there would be opportunities to introduce state-of-the-art technology and processes honed at IG’s worldwide operations into the Impact business. It already has a number of design and manufacturing facilities in the US.
Impact Innovations founder and chief executive John Dammermann will remain with the business.
Design Group had sales of £327.5m in the year to 31 March. The US was its largest single market making up 42% of sales at £136.8m. The enlarged group’s market share of the gift packaging market in the US and Canada will be around 22%.
Its products include giftwrap, gifting and retail bags, greetings cards, stationery and crackers.
The share placing was oversubscribed, with the first tranche of 6.26m shares admitted to trading on AIM today (29 August). The second tranche of 3.544m shares is subject to approval at a shareholder meeting to be held on 17 September.