Leeds-based Straight bought Dyro Holdings, owner of Hull-based Powell Plastics, for a total 2.9m.
The leading maker of kerbside recycling boxes previously outsourced all its manufacturing but the purchase sees Straight take about a third of this in-house.
Dyro, which employs about 60 staff, earned the bulk of its 10m annual revenues making plastic recycling and waste containers for Straight. The business has more than 20 injection moulding machines and made a 1.12m pre-tax profit in 2009.
Straight chief executive Jonathan Straight said he plans to boost Dyro's efficiency and invest in the factory, and the deal will increase the group's revenues and profitability.
"A business needs to remain as competitive as it can and we felt it was time to evolve the business model further," he said.
"Our model was previously concerned with outsourcing manufacturing and that works up to a point, but we got to a size where this particular supplier was reliant on us for 60 per cent of its business. When we took the wheeled bin lines in that quickly went up to 80 per cent.
"We felt it was not too clever having a third party surviving on that level of manufacturing business from us."
Dyro, based off Hedon Road in east Hull, has good road links and access to the Port of Hull. Straight said it will provide a new distribution hub and an "excellent base for its growing exports business".
The 2.9m consideration consists of an initial cash payment of 0.97m, plus two further cash payments of 0.97m on the first and second anniversaries of completion.
The initial payment was funded through a 1.5m loan from Lloyds TSB. The rest of the loan will be used to meet Dyro's working capital needs. The deferred sums will be paid for with cash generated by the acquisition.
Mr Straight said he plans to return to the City at some point in the future to raise cash through a share placing. "One is never entirely comfortable about bank debt but it's a necessary part of what we have to do at the moment," he said. He added more acquisitions are likely to follow. "This is not the first piece and not the last." Dyro's former owners also entered into a sale and leaseback deal with Straight for its factory, at an annual rent of 145,000.
In March Straight bought the bulk of waste company Helesi's UK business for 1.65m in cash, after the firm ceased manufacturing at its Bradford plant in September 2009.
The deal gave Straight Helesi's UK order book and its first branded wheelie bin. Following the deal, Dyro increased its work for Straight, making its branded wheelie bin.
Straight said the integration of Helesi is going well and a number of customers have already been supplied with wheelie bins made in the Dyro factory. It added it has made good progress in re-establishing the level of market share it had in the wheelie bin market before Helesi closed its factory.
Mr Straight said the Dyro deal is the start of a process to take all manufacturing in-house.
"Helesi was a sort of halfway step and this sort of finishes it," he said. "We see it as a differentiator from our competitors.
"The plan has to be to ultimately take everything in but that's a slow burn."
As well as making products for Straight, Dyro also has an injection moulding business which supplies shelving and storage products to the DIY sector. The group said these will run alongside its garden and hardware business, with cost-savings and cross-selling synergies expected.
"Our team has considerable experience in running manufacturing businesses at both board and management levels and this will aid the speedy integration of Dyro into the group," said Mr Straight.
He said the deal will act as a "springboard for further vertical integration".
HUNGRY FOR ACQUISITIONS
Straight's purchase of Dyro Holdings is the latest in a string of acquisitions as it looks to lead consolidation in the recycling products sector.
The company was established in 1993 in Leeds by Jonathan Straight, initially as one man and a desk.
It listed on the Alternative Investment Market (AIM) in 2003 and acquired its main competitor Blackwall in 2004 for 6.75m.
In August 2007 it bought chewing-gum bin company Gummy Bins for an undisclosed sum.
In January 2009 it bought Harcostar Garden Products for 400,000, which traded in the UK and Europe.
At the end of last year it started manufacturing in the US in order to service North American customers.
In March Straight bought the bulk of waste company Helesi's UK business.