Shares in the owner and developer of value-focused consumer products company UP Global Sourcing (UPGS:AIM) gained 4.4% to 223.5p after it agreed to buy the Salter brand for £32 million in cash.

The proposed acquisition, which requires shareholder approval, has been part financed through a placing of 7.1 million new shares at 210p, raising £15 million from institutions and a retail offer via the PrimaryBid platform.

The company said the fundraise was ‘significantly’ oversubscribed. The new shares represent 8% of the company’s enlarged capital.

The company has also agreed an additional £10 million term loan with its bankers.

Salter Brands Limited is the UK’s oldest houseware brand dating back to 1760 and is the UK’s market leader in kitchen and bathroom scales.

RATIONALE

The company, better known as Ultimate Products, has owned the Salter license to sell kitchen electrical and cookware (excluding scales) since 2011 but it was due to expire in 2024, so today’s acquisition eliminates renewal risk as well as royalty payments which totaled £1.3 million in 2020.

The deal is expected to be ‘significantly’ earnings enhancing in the first full year of ownership contributing revenues of £16.7 million and pre-tax profit of at least £4 million.

A deferred £2 million of consideration is payable in cash in four traches over 24 months post completion of the deal.

Ownership will provide the opportunity to create a more diversified Salter brand portfolio and develop international sales from a low base.

Shore Capital warmly welcomed the acquisition, saying ‘we see the proposed acquisition as a very good strategic fit indeed for UP, given the existing knowledge and relationship, whilst further driving UP’s ambition to be the home of brands.’

INLINE GUIDANCE

The board anticipates that fiscal 2021 performance will be inline with current expectations with revenues of higher than £133 million and pre-tax profit more than £10.8 million.

Consensus expectations are for 2021 revenues to 31 July to grow 22% to £134.75 million and pre-tax profit to increase 21% to £10.78 million according to Refinitiv.

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Issue Date: 25 Jun 2021