Spectra Systems Corporation (AIM:SPSY, OTC:SCTQ) has agreed to buy Cartor Holdings Limited, a move described as a strategic acquisition to bolster Spectra's position in the polymer banknote substrate market.
The enlarged company is expected to have new sales opportunities across product ranges – including postage stamps, tax and revenue stamps, brand protection, security labelling, and other security documentation.
It is also expected to improve margins for the polymer substrate business.
Spectra noted that the deal will have a maximum consideration of £10.5 million, beginning with a £5.5 million cash payment upon completion and followed by an issue of shares worth £1 million and subsequent contingent share payments tied to milestones related to a central bank customer.
The AIM-quoted company also assumes some £4.5 million of Cartor’s current debt, with an average interest rate of 0.3%.
At the same time, Cartor retains its existing management, under new employment agreements, and it enters into a new 20-year lease on its purpose-built manufacturing facility in Wolverhampton.
Spectra chief executive Dr Nabil Lawandy described the board as "delighted" with the deal that "solidifies its position in the polymer substrate market".
“Our experience in working with the Cartor team for two years has been exceptional and I have great confidence in the leadership of the group led by Andrew Brigham (managing director), Ian Brigham (chairman) and Martin French (finance director),” the Spectra chief executive said.
“Andrew, Ian and Martin are experienced, innovative, resourceful and energetic individuals, with whom I am excited to work to increase our revenues and earnings over the coming years.
Lawandy added: "Given Spectra's strong cash position as well as cash generation, the board is confident that we will continue to issue our dividends and meet our customers' financial obligations following completion."
Andrew Brigham, Cartor managing director, added: “The acquisition comes at a time when Cartor is poised for growth and under Nabil's leadership we hope to accelerate this and unlock new opportunities.
“The Cartor group expects to leverage Spectra's deep technical expertise and Cartor's operational 'know-how' to deliver game changing solutions to its current and future customers."