LONDON (ShareCast) - (Sharecast News) - Tissue paper company Accrol Group announced the acquisition of flushable and biodegradable wet wipes business John Dale on Friday, for a total cash consideration of £3.9m funded from its existing cash reserves.

The AIM-traded firm said the acquisition of John Dale wsa a strategic move into high-growth products within the wet wipes segment of the tissue market, providing a "well-invested" platform on which to build a sizeable business.

It said John Dale had a "long-established and unrivalled" reputation as a privately-owned manufacturer of own-branded and private label wet wipes and facial tissues for the UK retail market.

Both Accrol and John Dale shared a number of customers, but John Dale would also bring some "significant" new accounts into the group, the board said.

It added that its product range included flushable and biodegradable moist toilet wipes, antibacterial and antiviral wipes, facial cleansing wipes, baby and toddler wipes, and feminine hygiene wipes.

The addition of incremental volume to the Accrol facial tissue business would serve to leverage the group's existing production facility in Blackburn.

"A move into the attractive wet wipes segment has been on our radar for some time, as a natural extension of our product range and wholly in line with our growth strategy across the household products category," said executive chairman Dan Wright.

"It was essential, however, for us to find a business with a disruptive and environmentally friendly product which we could scale through organic investment."

Wright said John Dale fit the firm's criteria for growth, with quality of product and market positioning, operating excellence in its asset base, and the optimisation of its distribution strengths.

"It gives Accrol a ready-made platform on which to build a sizeable wet wipes operation and presents an unmissable opportunity for us to compound shareholder value."

The John Dale business currently operated a single daily shift, five days a week, from its owned premises in Flint, North Wales, which was currently generating annualised revenue of around £6m, and normalised EBITDA of £0.6m.

Following acquisition, Accrol said its primary areas of focus would be the expansion of the antibacterial and antiviral wet wipe ranges, and the optimisation of its production facilities.

The acquisition included the 47,000 square foot property from which the business operates, with both the business and the property being purchased from John and Pauline Dale.

"John Dale is an excellent business, with three modern wet wipe machines, which are significantly under-utilised," said Accrol chief executive officer Gareth Jenkins, adding that the UK wet wipe market was valued at £0.5bn.

"We are confident that, with our wide customer base, market and operational know-how and a modest investment in additional machine assets, we can scale this business significantly, while generating strong margins, over the next two to three years.

"The slack within the property and working capital assets of the business will fund much of this growth and accelerate financial returns."

At 0924 BST, shares in Accrol Group Holdings were up 3.45% at 60p.

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