The deal, which was struck last night (24 January) after "some months" of discussion, was followed this morning with Litho Supplies' announcement that "uncertainties in the financial markets" would mean its profits would be "lower than market expectations".

The deal could spell a slowdown to Litho Supplies' recent acquisition strategy. Litho Supplies sales director Eddie Williams said: "Let's get this [acquisition] settled before we look at others."

GAE joint managing director Tony Hards said it was "business as usual" for the post-press specialist, whose 10-strong sales force is bolstered by 47 salespeople from Litho Supplies.

Hards and joint managing director Bryan Godwyn remain in their roles and are joined on the GAE board by Litho Supplies' chief executive Michael Hammond and sales director Eddie Williams.

Hards told printweek.com: "I can't think of anyone to match us, from Lands' End to John O'Groats."

He added that the deal has given Litho Supplies its "first real sole distribution deal" with the addition of GAE's range of Horizon finishing kit and said the merger was a "natural progression" following the pair's Shinohara UK tie-up.

The deal comprised an initial payment of £1.4m in cash and £200,000 in Litho Supplies shares, with a "deferred performance-related consideration" of £700,000 in the three years.

This marks the third acquisition for Litho Supplies over as many months, after buying the offset division of rival distributor NCS Supplies earlier this month and wide-format supplier Andersons last October. GAE added 54 staff to the Litho Supplies operation, taking its total to 293.

However, Litho Supplies warned that the recent turmoil in the financial world would put a dent in its upcoming results. In a trading update, it said: "The board of Litho Supplies Plc announces that trading in the second half of the year ended 31 December 2007 was impacted by reduced confidence following the uncertainties in the financial markets with the resulting effect that the profit before tax for the year will be less than market expectations."

The figures, which are currently being audited, are due to be released in full in "March or April".

The statement continued: "The board is addressing the cost base of the group and has closed a distribution unit in the Midlands, consolidating the logistics of the operation within another warehouse in the company."

Litho Supplies chief executive Michael Hammond said: "Unfortunately, we had to make seven people redundant" at the Perry Barr, Birmingham site.

Shares in Litho Supplies on the LSE were down by more than 20% at the time of writing.