Mpac Group plc
(“Mpac” or the “Company”)
Acquisition of Switchback Group, Inc.
Mpac Group plc (AIM: MPAC) a global leader in high speed packaging and automation solutions is pleased to announce that it has acquired the entire issued share capital of Switchback Group, Inc. (“Switchback”), a USA based supplier of packaging machinery and automation solutions to the food, beverage and healthcare markets (the “Acquisition”). The Board expects the Acquisition to be immediately earnings enhancing.
The initial consideration for Switchback is $13.0 million, payable in cash. Further earn-out consideration of up to $2.0 million may become payable depending on performance, further details of which are set out below. The initial consideration for the Acquisition has been financed from the Group's existing cash resources. Following the Acquisition, the Group will maintain a strong balance sheet with a net cash position and an undrawn £10.0 million revolving credit facility.
Background to and rationale for the Acquisition
Switchback was founded in 2006 and is a provider of packaging machinery and automation solutions to the food, beverage and healthcare markets with a particular strength in the high growth craft brewing industry, benefiting from the shift towards increased use of recyclables, aluminium cans, and cardboard packaging. Switchback is based near Cleveland, Ohio, USA and employs 45 staff.
The Acquisition represents a compelling fit with Mpac's strategic intent of being a market leader in the provision of full-line packaging solutions for the pharmaceutical, healthcare and food and beverage sectors.
The range of products offered by Switchback gives further breadth and depth to Mpac's cartoning and end of line solutions. Switchback will provide a platform to further build our business in the USA giving access to a wider customer base and the opportunity to provide existing customers with a wider range of productivity solutions as the industry trends towards lower volumes and higher variety.
Mpac will continue to support Switchback's strategic growth plans and talented staff, providing access to the group resources, global sales and service network to leverage growth opportunities in Mpac's existing core markets of healthcare and food.
The unaudited financial statements of Switchback for the year to 31 December 2019 showed revenue of $14.2 million and profit before tax of $2.1 million. Unaudited net assets at the same date were $4.4 million including net cash of $4.9 million.
Terms of the Acquisition
Mpac has acquired the entire issued share capital of Switchback for an initial consideration of $13.0 million, on a cash-free, debt-free basis, to be paid in cash, subject to customary adjustments for working capital. In addition, earn-out consideration of up to $2.0 million will be paid in two tranches of up to $1.0 million subject to the achievement by Switchback of certain performance criteria based on EBITDA generation for each of the 12-month periods ending on 30 September 2021 and 30 September 2022.
The President of Switchback, Dave Shepherd, previously a shareholder, will remain with the business to continue the next phase of its growth strategy. The acquisition of Switchback is expected to deliver sales and service synergies through the utilisation of Mpac's wider sales and service resources in North America and Mpac's global footprint. Switchback's facility in Ohio will provide a US sales and service presence for Mpac's existing customers in the USA.
Tony Steels, Chief Executive of Mpac, commented:
“The acquisition of Switchback represents another key stage in the strategic development of Mpac, providing a strong USA footprint, together with a great range of products, talented employees that have demonstrated entrepreneurial growth to become market leaders with embedded customer relationships.
I am very excited by the opportunities presented by bringing Switchback into the Mpac Group, providing the resources to support the continued growth and the improved overall Mpac customer proposition.
Switchback's performance during the COVID pandemic has been strong with a good orderbook, demonstrating the high quality of the business.”