Inspecs is buying the German company Eschenbach Holding for €94.85 million (£84.7m), a move that will enable the British eyewear company to obtain greater scale and provide it with the opportunity to acquire bigger global licenses.
Inspecs will also be able to utilize its manufacturing expertise in Asia to assist Eschenbach in obtaining cost synergies. It also believes that some of Eschenbach’s brands are well-suited to being sold to its own customers.
Eschenbach addresses the premium segment of the frames market, while Inspecs’ current focus is on mid-market and entry-level priced products. It will also broaden the British company’s portfolio of customers, as Eschenbach has relationships with a broad range of independent opticians and mid-sized retail chains beyond Inspecs’ existing customers.
Based in Nuremberg, Eschenbach has two divisions, one that designs and distributes frames while the other produces specialist optics products. It sold around 3.6 million frames in 2019 and is the number one supplier of prescription glasses in Germany and one of the leading independent eyewear distributors in the U.S. Inspecs is assessing the opportunity to supply Eschenbach’s optics products to its customers.
Eschenbach’s senior management team in Germany and in the U.S. will join Inspecs, which is expected to help to mitigate risks in the integration process. The German company’s top managers are Jörg Zobel, chief executive; Holger Maas, chief financial officer; Matthias Anke, managing director of optics in Germany; Scott Senett, chief executive of Tura; and Ken Bradley, CEO of the U.S. optics division. Tura is an optical design house based in Manhattan.
Inspecs expects the acquisition to be earnings accretive for the 2021 financial year. Eschenbach generated revenues of €143.3 million in 2019, after growing by an annual average of 5.9 percent between 2017 and 2019. Ebitda, excluding leasing costs, totaled €10.3 million last year and the business was cash generative. It posted a profit before tax of €1.6 million in 2019, after being loss-making the previous two years.
“As a high-quality business with a strong management team and track record of margin-accretive growth, Eschenbach represents the ideal fit for Inspecs,” said Robin Totterman, the chief executive.
“Moreover, it will enable the group to penetrate key global markets, broaden our customer reach, strengthen our brand portfolio and capitalise on the compelling structural opportunities that exist in the fragmented global eyewear market.”
Eschenbach has an established presence in the U.S. and continental Europe, particularly Germany and France, with 250 sales representatives alongside its portfolio of more than 15 house and licensed brands. The German firm has more than 12 international subsidiaries, distributing into more than 80 countries, and supplying more than 40,000 points of sale.
The deal is being part-funded through a £64 million (€71.5m - $85m) share placing at 210 pence a share, with the balance coming from cash reserves and bank loans. The placing was successful completed on Nov. 19 through an accelerated bookbuild. Inspecs sold 30,476,191 new shares, which represent 30.09 percent of the enlarged issued share capital of the company. Inspecs’ directors subscribed for a total of 709,518 shares.
Inspecs noted that the acquisition provides it with a ”significant and immediate extension” of its presence internationally that would have required several years and significant investment to build organically.
Inspecs added that its trading since June 30 has been in line with expectations as the order book continued to grow during October. Opticians had remained open, despite the reintroduction of Covid-19 restrictions.
“Factory production has steadily increased from a low in early 2020 and the recent production rate at the factory in Vietnam was in line with the previous year. The recently completed adjacent factory in Vietnam is expected to start production in the first quarter of 2021,” the company said.
It noted that a new house brand made from fully sustainable and recycled materials was due to be launched next year. Investments in both the digital B2B platform launch and the £2.4 million acquisition of the collapsed U.K. eyewear firm Norville have yielded “encouraging” results.
Logistical and production efficiencies implemented at Norville have led to the business generating a positive core earnings contribution since its acquisition in July 2020. “The Norville acquisition also allows the company to provide an integrated lens and frame offering to customers that is targeted for launch in 2021,” Inspecs said.
Inspecs is targeting a medium-term net debt/Ebitda ratio of 1.5 times and does not expect to pay a dividend in the 2021 financial year.