Through a transaction valued at about $340 million, 1-800 Contacts will be sold to Fenway Partners, an American private equity firm. Fenway Partners is paying $24.25 per share for the American contact lens company, representing a 21 percent premium over 1-800 Contacts' closing share price on June 1 and a 34 percent premium above its share value for the 30-day trading period to June 1.
1-800 Contacts' chief executive, Jonathan Coon, said that the move will provide value for shareholders, but will also allow the company ?to pursue its long-term goals with the flexibility and long-term focus of a private company.? The transaction, expected to close in the 2nd half of fiscal 2007, is subject to shareholders' approval and other regulatory approvals.
The acquisition doesn't include the international operations of 1-800 Contacts, represented essentially by ClearLab, which are being split between a Korean company and its Japanese licensee, Menicon.
ClearLab's manufacturing, distribution and customer support operations are being acquired by Mi Gwang Contact Lens Co., a soft contact lens producer based in Korea. The sale, which includes the company's base in the UK as well as its production plant in Singapore, will be made in exchange for a cash payment of $9 million and $6.5 million worth of new shares in Mi Gwang to be issued at the closing of the acquisition, scheduled for June 29.
Mi Gwang will not get ClearLab's flat pack technology, which instead is being sold for $23 million to Menicon, Japan's largest contact lens producer. Along with this one-time payment, ClearLab gets deferred consideration of $2 million upon Menicon's launch of flat-pack products in Japan, $3 million when Menicon enters a license agreement with a third party outside of Japan and earn-out payments based on a percentage of Menicon's sales of flat-pack products. This transaction is to be closed on June 22, at which point the two companies' licensing agreement will be terminated.
1-800 Contacts says the two ClearLab transactions could result in a pre-tax benefit of $13 million. The proceeds will be used to pay off debt and leases.