IG Design’s US deal greeted warmly by investors
IG Design (IGR) 742p
Gain to date: 6.5%
Original entry point: Buy at 697p, 19 December 2019
Our bullishness on greetings card designer and supplier IG Design (IGR:AIM) gets some early vindication as it expands in the US.
It is set to buy CSS Industries for an enterprise value of £89.7m in a transaction which is expected to be earnings enhancing from the first full year of acquisition, doubling the size of its US business.
IG Design is paying five times earnings which looks cheap, and may reflect the material borrowings CSS had accrued.
In a further update the company said it had raised £120m through a share placing, which will help pay down debt at CSS.
Shore Capital analyst Peter Ashworth says: ‘The acquisition broadens the group’s product portfolio and provides customers with a substantially enhanced “one-stop-shop”, establishing a leading presence within the US craft market.
‘The acquisition also reinforces the group’s position as the global industry leader in gift packaging; rapidly scales its “everyday” product category as well as online revenues and presence within the floral decorative packaging industry.’
In addition Ashworth notes the deal provides a big boost to the company’s manufacturing and distribution capabilities.
SHARES SAYS: This looks potentially a very positive purchase, so keep buying.