Rupp + Hubrach is the 5th biggest player in the German corrective lens market, with an excellent brand image in terms of innovation, quality and service. Including a small portion of BBGR's product line, which it has been distributing in Germany for many years, R+H had a market share of about 11 percent in the country in 2001, as compared to 12.3 percent for Hoya, 17.5 percent for Essilor, 20.5 percent for Zeiss and 30.0 percent for Rodenstock, which may change ownership soon.
Conducted through its own BBGR subsidiary, which previously bought Dollond & Aitchison's laboratory in England, the acquisition of R+H will thus turn the French Essilor group into the 2nd largest factor in Europe's largest market. Essilor did not reveal the purchase price. The family-owned company, which is based in Bamberg near Nuremberg, has just over 600 employees and two prescription laboratories in Germany and Ireland, with a turnover of e54 million last year. Including certain additional services, its turnover was more like e60 million, up from e57.7 million in 2001.
Essilor is not acquiring R+H's stake in Uvex or a leading laser surgery operation, R+H Laserschutz, which will remain the property of R+H's two former shareholders, Werner Rupp and Günther Hubrach. The two executives will continue to be involved with Essilor as consultants. The rest of the current management, led by Gerhard Alliger and Ralf Thiehofe, will remain in place.
Besides a major recent push in the area of polycarbonate lenses, which Essilor knows well, R+H has been developing lately a certain expertise in the area of curved sun lenses for sports eyewear. Its export ratio was only 6 percent recently, but this may be developed through Essilor in the future.
Earlier this month, Essilor announced the takeover of a smaller firm, this time in the USA, which specializes in the manufacture of a wide range of prescription polarized sunglass lenses ? a promising area which is the target of a major internal development. Based in Salt Lake City, the company is called Specialty Lens Corp., employs 40 people and has annual sales of only about $4 million. SLC uses a proprietary in-mould molecular aggregation process, called PerfectPolar. Essilor will preserve SLC's current management and integrate the company into its own North American production division.
Announcing the purchase of R+H at Essilor's annual economic conference last week, Xavier Fontanet, the group's chairman and CEO, said it marks a symbolic start of a new wave of external growth, taking advantage of ?positive signs that various players want to sell? for the first time in years. He sees opportunities especially among small and medium-sized businesses whose owners want to sell out before market conditions harden further.
Acquisitions should help Essilor to return to the average annual growth rates of 8 percent of the 1995-2000 period, faster than the world market's average growth of about 6 percent. Essilor put the brake on acquisitions in 2000-2002 in order to cut debt and devote cash to the repurchase of Saint-Gobain's stake in the group. In 2002, Essilor slashed its net debt by e158 million or almost 50 percent, taking the debt/equity ratio down to a historically low level of 13 percent. The record free cash flow of e201 million reached last Dec. 31 may even allow Essilor to ?take risks? in its acquisitions.
The renewed push for acquisitions this year will focus on securing strong returns from any acquired companies. With a strong market share now firmly established in most of the major markets, Essilor says it will be less cautious in its expansion and will focus on economic arguments for possible takeovers in contrast with the previous policy of building up its geographical presence.
Regarding innovation and future revenue streams, Essilor, which spends 4 percent of turnover on research and development, announced plans for the introduction in Germany this year of new technology, already tested in Japan, to produce ?personalized' progressive lenses under the Varilux Ipseo brand.
It's a type of product in which Essilor's two main German competitors, Rodenstock and Zeiss, have been particularly active in the past 2-3 years, mostly in their home market. Essilor's version of the technique includes diagnostic capabilities that will allow the manufacture of tailor-made lenses based on the physiological behavior of the individual, superseding the current standardized production methods.