A couple of days after admitting the loss of the Armani licenses, Safilo announced an agreement to take over Polaroid Eyewear with the help of its main shareholder, Hal Holding. Combined with the acquisition of a license for Céline eyewear, previously held by De Rigo, it should offset about half of the loss of Armani.
The takeover of Polaroid Eyewear from StyleMark, the company that acquired the business in 2007 from the Petters Group, is for a price of $87.5 million, but it should present a maximum cost of €65.0 million for Safilo based on predetermined currency rates. The deal is scheduled to be completed in the first quarter of 2012. The Polaroid Eyewear business is expected to generate annual sales of around $63.0 million and an Ebitda of about $8.8 million for this year.
Polaroid is the company that invented the first polarizer for commercial use in 1929, and the first pair of Polaroid sunglasses was sold in 1935. Polaroid Eyewear has offices in the U.K, Switzerland, the U.S., Italy, Sweden, the Netherlands, China and Russia, and a global distribution network covering other countries through partnerships. Petters Group, which had been licensing the Polaroid brand name for consumer electronics, acquired the independently managed Polaroid Eyewear as part of the wider Polaroid Holding Company in 2005.
The acquisition of Polaroid Eyewear will reinforce Safilo's portfolio of house brands, adding a market leader in the manufacture and distribution of high-quality polarizing lenses. Safilo's chief executive, Roberto Vedovotto, noted that the polarized eyewear market is enjoying steady growth. He said the transaction would enable the company to enter a “specialist” market segment from which it has been absent.
Hal Holding, which is Safilo's largest shareholder with 37.2 percent stake held through Multibrands Italy, will finance the transaction thanks to a €44 million loan that Safilo will pay back in shares. The loan will be granted a few days before the settlement of the Polaroid purchase but is conditional on the approval by Safilo's shareholders of a capital increase reserved to Multibrands Italy. Safilo will call an extraordinary shareholder meeting on Dec. 21.
The capital increase would not represent more than 10 percent of Safilo's current capital, or 4.42 million shares. Safilo's market capitalization reaches about €281 million but the new shares would be issued at a value of €9.0 per share, representing a premium of about 83 percent over current market prices. At midday, Safilo was trading at around €4.92 on the Milan stock exchange. The capital increase is due to be carried out within a week of the closing of the Polaroid acquisition. The rest of the cost of the acquisition would be financed by Safilo through its own liquidity and/or existing credit lines.
The deal comes after Safilo announced the signing of a global, multi-year license agreement to produce and distribute women's eyewear under the Céline brand. Safilo's new collection will be available from January 2012 in Céline stores and selected points of sale.
The latter deal reinforces the group's ties with the LVMH luxury group, which owns Céline and many other fashion brands. In 2010, Safilo produced a limited edition of Louis Vuitton eyewear. It is believed that the Céline license could generate about 2-3 percent of Safilo's annual sales when fully rolled out, and that it will last for at least five years.