PRIME ACTIVE Capital plans to ramp up its investment in US mobile phone retailer Cellular Center after the €11.3 million sale of its plastic card services unit, a business that generates almost two-thirds of its revenues.
Executive chairman Peter Lynch said Prime Active chose to sell the card operation to CPI Card Group UK Holdings because the investment required to achieve scale for the business was unlikely to deliver "anything meaningful" by way of share price growth.
The operations of Cellular Center, in which Prime Active has an 80 per cent stake, offers greater prospects for rapid growth in the immediate future, he said. "We're taking money out of one area and putting it in the next area."
Cellular Center was established last year by US businessman Robert Haulbrook. He was chief of Irish mobile firm Meteor when it was sold in 2005 to Eircom, where Mr Lynch then worked as chief financial officer.
While Cellular Center currently has 40 stores in Georgia, Texas and Florida, Mr Lynch believes there is scope to develop another 25-50 outlets in the near future through acquisition and by opening new stores.
Beyond that, Prime Active also sees potential to expand by acquisition of Media Square, a British marketing communications business in which it took a 21.5 per cent stake earlier this year.
The CPI transaction is subject to the approval of shareholders in Prime Active, formerly Oakhill.
CPI Card Group, controlled by Chicago private equity firm Tricor Pacific Capital, will pay £11 million (€13.9 million) for Prime Active subsidiaries the Plastic Card Company and PCC Services. The net consideration will be €11.3 million after taking account of the debt in these operations and other costs.
The assets to be acquired by CPI, the second-largest operator in the global plastic cards sector, had revenues last year of €21.4 million, earnings before interest tax depreciation and amortisation (Ebitda) of €2.53 million and pre-tax profits of €1.11 million.
This represents the bulk of total revenues at Prime Active, which amounted to €34.63 million last year. The firm's other activities had a pre-tax loss of €339,000 and Ebitda of €614,000.
"Prime Active Capital would have considerable difficulty driving growth in this sub-sector in the next few years without broadening the product range to include credit cards and higher security items, the investment and development costs of which would be very substantial," Mr Lynch said.
The firm has not given any thought to the possible disposal of its printing unit Bell & Bain, which provides a specialist service to academic publishers. "We're trying to do one thing at a time," he added.
Shares in Prime Active closed unchanged at 68 cent.
