IMA buys Nova

Leading Italian machinery manufacturer IMA has acquired 90,68% of the shares in Packaging Systems Holding, based in Delaware, US for $14.6m. This company owns 100% of the industrial group Nova Packaging Systems, a world leader in the manufacture of automatic machines for the bottling of capsules and tablets (counting machines) sold under the Kalish, King, Lakso, Merrill and Swiftpack brands.

The remaining shares in the company are held by its management with whom IMA has signed an agreement which, inter alia, grants them an option over such shares in exchange for a call option. Both these options expire in 2009 and can be exercised at a price linked to the EBITDA achieved in the intervening period by the Nova Group. If these options are exercised, the total cost of the shares held by management will range from $2-8.5m. The consolidated sales of the Nova Group are forecast to be around $35m in 2004, with an EBITDA in excess of 10% of net revenues.

'By purchasing Nova Packaging,' commented Alberto Vacchi, managing director of IMA, 'our group achieves at least three major objectives that strengthen our world leadership in the manufacture of production and packaging machines for the pharmaceutical industry. In the first place, IMA expands its range of machines for the packaging of capsules and tablets since, alongside our existing blister lines, we now offer bottle filling lines. This form of packaging is preferred in certain countries, such as the US, as well as in certain key sectors, such as healthfood. Furthermore, given that the two ways of packaging solid products, blisters and bottles, generally co-exist within the same client, the major commercial synergies released by this acquisition are strikingly obvious.

'Secondly, sales of the counting machines manufactured by Nova Packaging will give major impetus to the sales of other products in IMA's current range, such as capping, sealing, labelling, cartoning and end-of-line machines. These machines are generally part of bottle filling lines which Nova had acquired from third parties.

'Lastly, the acquisition of Nova Packaging means that the IMA now has also manufacturing facilities in the United States, a market that alone accounts for more than 50% of pharmaceuticals production worldwide and which demands ever closer ties with equipment suppliers. We have been pursuing this objective for many years, without much success given both the absence of suitable acquisition companies and the high costs and risks associated with a "green field" start-up of production controlled from Italy. In view of their strong strategic value, these three factors would, alone, have fully justified the decision to proceed with this acquisition.'

In addition, concluded Vacchi, the valuation of Nova in strictly economic/financial terms does not dilute IMA's principal multiples, even after exercising the option, and therefore provides considerable scope for the creation of additional value for our Shareholders.