By  on August 18, 2008

In a surprising move, $2.6 billion eye care benefits provider VSP on Monday acquired Marchon Eyewear Inc. for $735 million in cash and debt.

Under the terms of the agreement, Marchon, whose revenues exceeded $525 million last year, will become a wholly owned subsidiary of the Rancho Cordova, Calif.-based VSP. The company delivers full-service eye care benefits to 55 million members in the U.S. and Canada and dispenses eyewear technologies and services to private practice eye doctors. The firm also provides low-income, uninsured children with free eye care.

Al Berg, Marchon’s president and chief executive officer, and Larry Roth, executive vice president, along with the eyewear manufacturer’s global team, will continue in their current roles. Marchon will continue to operate from its Melville, N.Y., headquarters as an independent entity within the VSP organization.

“We were looking for the right strategic move and this deal has been about a year in the making,” Berg told WWD. “Our industry has gone through a number of changes in the last 10 years, and while we are successful global players, we have bigger competitors and felt we needed a long-term strategy to position Marchon for the next 100 years. We’re growing globally but a lot more is needed to invest in growth — whether it’s acquisition or expansion of factories we already own or the expansion of sales offices around the world. We now have the resources to increase our business sizably and go head-to-head with the two biggest players [Luxottica and Safilo Groups] in the industry.”

Marchon produces eyewear and sunwear for such brands as Calvin Klein, Coach, Emilio Pucci and Michael Kors. Additionally, the company manufactures its own collections of eyewear under the Airlock and Flexon brands. The company was founded in 1983 by Berg, Roth and Jeff White, who died in 2005.

According to Berg, the acquisition will equip VSP’s 25,000 independent optometrists with Marchon’s eyewear collections for their retail divisions as well as the firm’s branding and sales tools. As part of the transaction, VSP will acquire Marchon’s 50 percent ownership interest in Eye Designs, which provides custom interior design and merchandising systems for the optical industry.

“Today, it’s very hard for optometrists to be successful on both the medical and business side,” Berg said. “Our experience is on the commercial side — in training, marketing, merchandising and in designing and building offices. We can help take doctors’ businesses to the commercial side and provide an environment of successful business.”

Doctors under the VSP umbrella will in turn encourage patients to purchase Marchon frames, but will not sell Marchon exclusively. The firm is not currently planning to open its own optical stores, but sunwear outlets will be considered in the next few years.

Marchon’s move into the managed care arena follows Luxottica’s lead. The Milan-based company, which owns Lenscrafters and Pearle Vision, offers a full range of its licensed collections at those facilities. According to Berg, Marchon is trying to build its new business model on targeting both the managed care and retail customer equally.

“[Luxottica’s] goal is to sell their own product in their own stores,” Berg said. “So from our perspective, our job is to help convince optometrists to dispense more of our product and show their patients why they should carry more Marchon product.”

Berg said each of Marchon’s licensed brands were enthusiastic over the news and that the deal has not affected department store accounts, which will likely carry more fashion-oriented frames than their optical counterparts.

“We met with all of our licensors,” Berg said, adding their enthusiasm for the deal was universal. “They need strong licensees in our industry. They are happy with Marchon but they also believe that the stronger Marchon is, the better it is for them. They understand the competitive landscape of this industry.”

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