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Northern retailer Hitchens Group is acquiring returned goods-handling specialist Wallgate in an £8.76 million shares and cash deal.

Stockport-based Hitchens, which operates some former Littlewoods stores and has Littlewoods Direct Home Shopping as a significant shareholder, is issuing 62 million shares and paying £750,000 for Wallgate, whose ‘RevShare’ returns management system offers store collection, inventory management, repackaging of returned items and similar services, principally covering ‘higher-value consumer electronics goods’. Hitchens, headed by managing director John Taylor, is already a customer of Wallgate, whose boss Howard Strowman will become chief executive officer of the enlarged group.

Hitchens was incorporated in February 2007 and floated on AIM last August and is raising £1.1 million at 13p. The company, which lost £654,000 on £932,000 turnover in less than two months to last September, is further adding to its cash by issuing 10.5 million shares to acquire PLUS-quoted investment concern Flarepilot, which has £500,000 cash.

Following its float fundraising, Hitchens had £7.2 million shareholders’ funds and has been restocking its existing stores and opening new ones. Taylor, who says the present retail environment is ‘very difficult’, argues the takeover combines Hitchens’ shops and online retail distribution with the retail outsourcing services and online retail activities of Wallgate, which lost £307,100 in the 18 months to September and ended the period with net liabilities of £270,000.

After the deal, Strowman will hold 24.3 per cent of the enlarged company and Littlewoods Direct Home Shopping will have a 16.3 per cent stake. Hitchens shares have perked up 3p on the news to 20p, valuing the company at £25 million.

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