Native Eyewear was recently acquired for $18.8 million by A.T. Cross, which is on a quest to build a $100 million optics business by 2010. A.T. Cross paid $17.8 million in cash and assumed $1 million in short-term debt to acquire Native, a Huntington Valley, PA-based company that is popular with the mountain sports crowd.
According to A.T. Cross, Native is profitable, had revenues of $11 million last year, and is expected to add 7 cents per share to earnings in 2009. That bottom-line addition translates to approximately $1.1 million in profits. In addition, that net income level indicates that A.T. Cross paid roughly 18-times earnings, or about the same multiple it paid for Costa Del Sol in 2003. The company financed part of the Native transaction with a new $35 million secured credit facility, the balance of which could be used for other optical acquisitions.
While known historically for its line of Cross pens, A.T. Cross now derives 24 percent of its revenues and much of its growth from its Optical Group segment. The business was formed in 2003, when the company acquired Costa Del Mar. It has since taken the brand from $11 million to $37 million in sales. A.T. Cross believes it can grow the two brands collective share of the premium sunglass market from 5 percent to 8 or 9 percent over the next three years, which would push the Optical Groups revenues to $70 million.
While there will be synergies in sales, distribution and product development, company execs say the deal was more about accelerating the growth of a small but fast-growing brand. For instance, A.T. Cross will speed up the development of new Native styles, notes Chas MacDonald, VP of A.T. Cross Optical Group and president of Costa Del Mar Sunglasses.
“Keep in mind that Native has achieved its sales volume with only about a dozen styles,” MacDonald states. “In comparison, Costa has 46 [styles]. 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.”
MacDonald sees considerable crossover opportunities, as well. “Costas business is very well developed in the Southeast, a geographic region where Native has limited distribution,” he explains. “Concomitantly, Native has good distribution in the Northeast and in the Mountain West regions, where Costa is just gaining distribution. We can leverage off of each others strengths to increase the sales for both brands.”
MacDonald also points out that A.T. Cross hopes to sell Costa Del Mar products into REI and EMS, which already carry Native.
