Native Eyewear Inc. was acquired for $18.8 million last week by A.T. Cross Co., which is on a quest to build a $100 million-a-year optics business by 2010. ATX said it had paid $17.8 million in cash and assumed $1 million in short-term debt to acquire Native, a Huntington Valley, PA company popular with the mountain sports crowd. ATX said Native is profitable, had revenues of $11 million last year, and would add 7 cents per share to earnings in 2009. That bottom line addition translates to $1.1 million in profits, assuming ATXs number of common shares outstanding remains the same.
That net income gain indicates A.T. Cross paid roughly 18 times earnings, or approximately the same multiple it paid for Costa Del Sol in 2003. ATX said it financed part of the acquisition with a new $35 million secured credit facility, the balance of which could be used for other optical acquisitions.
While known historically for its Cross pens, ATX now derives 24% of its revenues and much of its growth from its Optical Group Segment. The business was formed in 2003, when ATX acquired Costa Del Mar. It has since taken the brand from $11 million to $37 million in sales.
ATX thinks it can grow the two brands collective share of the premium sunglass market from 5% to 8% to 9% over the next three years. That increase would push ATX Opticals revenues to $70 million.
While there will be synergies in sales, distribution and product development, ATX executives said the deal was more about accelerating growth of a small, but fast growing brand. For instance, ATX will speed up the development of new Native styles, said Chas MacDonald, vice president of A.T. Cross Optical Group and president of Costa Del Mar Sunglasses, Inc.
“Keep in mind that Native has achieved its sales volume with only about a dozen styles,” MacDonald told analysts in a conference call the day the deal was announced. “In comparison, Costa has 46. And while selling more styles does not guarantee more sales, we believe that with a more robust new product flow, Native can both become a bigger player in its existing account base and expand to a new distribution.”