Only a few weeks after the momentous announcement of Essilor International's acquisition of Satisloh, which will turn the French company into the largest provider of equipment in the ophthalmic sector, including those used by lens processing laboratories, Spain's INDO Internacional signed a letter of intent with Buchmann Optical Holding of Belgium for the merger of their respective equipment businesses.
The result will be the establishment of a company with annual revenues of nearly €120 million, ranking as the major supplier of equipment for opticians. With sales of €73.5 million in 2007, Buchmann ranked second after Essilor in this category. With sales of €39.4 million, the equipment division of INDO, a company which is also involved in lenses and frames, ranked fourth after Nidek.
Further expansion is expected following the recent creation of a 50-50 joint venture in India between INDO and Prime Vision. The new company will provide machinery for India's rapidly expanding optical retail sector, but it may help the Spanish company to expand there also in the sectors of lenses and frames. Prime Vision was already a supplier of semi-finished lenses to INDO. It is owned by the Gupta family, which has also some common interests with Essilor in the country. A more distant branch of the same family works with Carl Zeiss Vision, and we shall discuss this operation in another issue of EyeWear Intelligence.
As for Buchmann, the group is itself the result of the acquisition several years ago of WECO Optik and of Rodenstock Instruments by the Belgian company owned by the Belgian family by the same name, which has been integrating their operations gradually with those of its own French unit, BRIOT. The process is not quite over yet. Before the merger agreement with INDO, Buchmann was said to be considering the layoff of up to 40 employees at WECO's facilities in Düsseldorf, transferring the production of its less sophisticated systems to BRIOT's French production unit, but the process may now take on different contours under the new structure.
Under its deal with Buchmann, whose financial terms are being kept confidential, INDO will form a new company that will group its own equipment operations with those of Buchmann, BRIOT, WECO and Rodenstock Instruments. The current shareholders of Buchmann will hold shares in the new company, controlled by INDO at 55 percent, but the Spanish company will have the option of assuming 100 percent ownership in three years' time at certain conditions.
Jacky Buchmann, who has been continuously active at the head of this company, although he is now 74 years old, will be a member of the new company's board of directors. His children will be involved in the new operation, which will be run by Ignasi Mira, general manager of INDO's equipment division.
Major synergies are expected from the merger in the areas of R&D, production, logistics and sales. Buchmann currently employs about 450 persons and its equipment is marketed through 12 different sales companies around the world. After its recent divestiture of the loss-making Werner Schulz, which was selling its systems in Germany, INDO markets its own products in the sector through six subsidiaries. INDO controls its own R&D, design and engineering operations but subcontracts the manufacture of its equipment to other companies, mostly in Spain.
Buchmann and INDO's equipment operations are both profitable, but as we have already reported, the Spanish company has decided to re-invent itself following the recent appointment of a new executive chairman, Juan Casaponsa. Working together with a new board of directors and with the current management, led by Antoni Olivella, it has decided to look for new strategic options, partly intended to achieve better economies of scale. One of them was the idea of getting out of one of the three sectors in which INDO is involved, but it seems to have rejected it.
The re-engineering of INDO, which is being accompanies by a re-financing process, has been partly triggered by recent losses due to restructuring costs, chiefly connected with the transfer of a large portion of its remaining Spanish production in other business areas to the Far East. One month ago it signed a new agreement with the Spanish labor unions for the dismissal of 99 more employees by July 2009, with half of them due to leave the company at the beginning of next year. The company plans to make further investments in the robotization of its remaining Spanish production.
To help cover the related restructuring charges and to reduce its debt, INDO has decided to double the number of shares to 21.26 million. The public company, which is quoted on the stock exchange of Madrid, expects to raise €16,695,000 through this equity increase.