It will be raising around £5.8m of this sum, before expenses, through the placing of shares, admission of which is expected to take place on 29 July.
Macfarlane chief executive Peter Atkinson said he got in contact with Nelsons approximately 18 months ago.
Atkinson said: “Our acquisition strategy focuses on identifying strong local and regional packaging distributors in the UK and we’ve created a pipeline of opportunities in that area.
“As with other acquisitions, we will run the business with minimal Macfarlane interference for a period of time. We have a two-year earnout period and will use that period to get to know the business even better and then determine after the end of the period if we need to make any changes, but this is a good quality business and we don’t see that being likely."
Payment will be in two annual instalments, subject to the meeting of trading targets. Earnouts are two payments of £750,000 each over the next two years, subject to Nelson’s hitting certain trade targets, which are included within the £6.75m total.
The purchase continues what has been an aggressive recent acquisition period for the Glasgow-based packaging and labels company. In May, it acquired fellow Glasgow-based Edward McNeill for around £2m and in April it purchased eight-staff Colton Packaging Teeside for up to £1.25m.
22-staff Nelsons turned over £7.9m in the year ending 31 December 2015 and had net assets of £1.3m. Atkinson said there is very little overlap between the two companies, other than in supplier base, and that Nelsons will provide access to new customers and increase the company’s Shelf Ready Packaging (SRP) product range.
Arden Partners has arranged the placement of up to 10,000,000 shares, to be placed on the stock market at a price not less than 58p per share with new and existing shareholders.
Macfarlane has only ever purchased one other business using the placing of shares, Network Packaging in September 2014. Atkinson said placing from its current shareholders has all been arranged and was oversubscribed.
“In the context of this acquisition, we decided an effective way of getting shareholders involved was to raise some money and that’s what we’ve done,” said Atkinson.
“We’ve presented to our shareholders a strategy that is built on organic growth, in what is a very fragmented market in packaging distribution, and this is just a continuation of that programme. We would expect to do two or three acquisitions per annum for the foreseeable future."
Nelsons managing director Gary Mason said: “I’m really pleased. I think having the support of a group like Macfarlane will take us to the next level. I think we sit quite well within their portfolio as we are a bit unique with what we do with our SRP.
“We’ve been in the trade for quite a long time and have grown quite well over the last few years and I’m looking forward to the challenge of hopefully being able to push things forward with Macfarlane.”
With the addition of Nelsons, Macfarlane now employs around 750 staff. Turnover is projected to increase by around £10m to £180m by the end of this year.
Two weeks ago, Macfarlane added a second distribution centre to its site at Edward McNeill.
