ADARE Printing Group has agreed to acquire the business and net assets of Kalamazoo Security Print (KSP), the Birmingham producer of printing forms, for Pounds 12 million sterling. The deal, which has to be approved by Adare shareholders, will be financed from the proceeds of a placing of new shares to raise Pounds 17.9 million.

The shares have already been provisionally placed with institutional shareholders. However, there is a clawback arrangement under which existing shareholders can apply on the basis of three new shares for every 11 held at 640p a share. The proceeds would also, be used to reduce group borrowings and to provide flexibility for investment and expansion, Adare said.

The last funding from share-holders was the rights issue in June 1995, which raised Pounds 2.95 million. Since then Adare has invested more than Pounds 26 million without recourse to share-holders.

The business and assets are being acquired from Kalamazoo Computer Group and include freehold and leasehold properties with a value of some Pounds 4.28 million sterling. An inter-company loan of Pounds 1.8 million will be waived, indicating goodwill of some Pounds 6 million. The deal will be earnings neutral in the first year, according to Adare's chief executive, Mr Nelson Loane.

He said negotiations had been taking place for three years and the purchase reflected the group's policy to build up strong brand names. The name, he added, would be used in its other businesses, with knock-on benefits. It had already added a number of well-known brand names including Prontaprint and Platignum.

KSP has a customer base of 40,000. Its products, said Adare, "can be supported by the substantial print capacity, broader product range and wider customer base of the Adare group".

KSP employs 355 people and is located on an 8.5 acre site in a 55,000 sq ft factory. It operates in three areas: forms; security products; and security documents.

KSP has had a cyclical record. While sales rose steadily from Pounds 17.5 million sterling in 1994/95 to Pounds 19; 27 million in 1996/97, operating profit fell from Pounds 2.6 million in 1994/95 to Pounds 1.1 million in 1995/96 but recovered to Pounds 1.87 million a year later.

When the deal is completed, Adare said KSP would be subjected to a period of "investment, deconsolidation and reorganisation to enable KSP to reach its potential as a fully developed member of Adare".

The enlarged group would be a "very substantial provider of business systems services" in the British market.