The FTSE 250-listed industrial thread manufacturer is paying the money for a 9.5% share in Israeli-based technology start-up Twine Solutions.
It also said it will get a seat on the board of Twine, which has developed a proprietary digital thread dyeing system, allowing thread to be produced on demand in any colour and length.
Rajiv Sharma, Coats’ group chief executive, commented: 'This is an exciting and innovative strategic move. We are investing in future technology which will improve our industry and its sustainability by directly addressing the key needs of our customers: speed, innovation and sustainability.”
He added: “The disruptive technology has the potential to revolutionise the thread industry and Coats will work closely with Twine to commercialise this opportunity."
In early afternoon trading, Coats shares were 0.3% lower at 80.70p.