UNIDARE, the engineering group, has acquired Eland Electrical, a British wholesaler of welding accessories, for up to £2.65 million sterling. There is an initial payment of £1.9 million and there could be a further payment of up to £750,000 if certain targeted earnings are achieved over the next four years.
Based in Edmonton, north London, Eland will be integrated with the wholesale side of Unidare's subsidiary, Unidare Cutting and Welding, based in York.
The enlarged group will trade as Eland Electrical and will be the largest wholesaler of welding accessories in Britain, according to Unidare. It is a "sensible bolt on", said Unidare's finance director, Mr Peter Gray.
The two executive directors of Eland Electrical will be responsible for the development of the business. The conditions for the earn out are "quite tough", said Mr Gray.
Sales will have to grow by 10 per cent per annum over the next four years and margins would have to be maintained.
Eland generated a pre tax profit of £110,000 on sales of £4.9 million in 1995. The results for 1996 are expected to show growth in both sales and profits. Around £2.5 million of sales (from Unidare Cutting and Welding) will be transferred to Eland.
The consideration is on a high historic p/e (1995) of over 25. And, as it has purchased net assets of some £1.1 million, there will be goodwill of £800,000. This will be written off against reserves.
Unidare will have no problems in funding the acquisition from its internal sources. It had net cash of over £4 million last September and generates an annual net cash flow of £3 million.
Following the transfer of its wholesale activities, Unidare Cutting and Welding will revert to its original name of Centrajet and will concentrate on developing its position "as a world class manufacturer of gas control and gas cutting and welding equipment".
It is involved in a £1.3 million investment programme at its York factory. This investment and the acquisition is "consistent with our strategy of developing our core activities in a very focused manner", said Mr Paul Duggan, Unidare's chief executive.
