KKR Buys 1-800 Contacts from AEA

KKR has agreed to acquire 1-800 Contacts, a portfolio company of AEA Investors and Thomas H. Lee Partners.

According to 1-800 Contacts, it is the largest retailer of contact lenses in the US and has served more than 20 million customers over the past 25 years. Company-owned brands include Liingo Eyewear, 6over6, Boomerang, and Premium Vision. 1-800 Contacts is headquartered near Salt Lake City in Draper, Utah.

Over the last several years, the company has invested in new technology and expanded its products including the buy of 6over6 – a provider of in-home eye exams using machine learning and sensors – in December 2019; and launching new app-based offerings including ExpressExam, which allows for consumers to quickly renew contact lens prescriptions online. The company’s sister brand Liingo Eyewear also introduced Rx Reader, an app that extracts optical parameters directly from a pair of prescription glasses.

In 2020, many Americans facing stay-at-home orders and business closures in response to COVID-19 turned to 1-800 Contacts in place of traditional brick and mortar sellers. During the peak of the COVID-19 shutdown, the company experienced a 100 percent year-over-year increase in new and returning customers. During that period, usage of the ExpressExam app also increased 200 percent and the Rx Reader app experienced a 700 percent increase in monthly active users.

AEA acquired a majority interest in 1-800-Contacts from Thomas H. Lee Partners (THL) in January 2016 with THL maintaining an equity interest in the company. THL had acquired the company from medical insurer Wellpoint, now known as Anthem, in January 2014. Anthem, an operator of Blue Cross and Blue Shield plans, bought 1-800 Contacts from Fenway Partners in June 2012 for about $900 million. 1-800 Contacts was founded in February 1995 by Jonathan Coon and John Nichols and went public on the NASDAQ in 1998 with Fenway Partners taking it private in June 2007.

“1-800 Contacts was founded 25 years ago to offer consumers a better way to buy contact lenses. Since the very beginning, we’ve kept the customer at the center of everything we do,” said John Graham, CEO of 1-800 Contacts. “It’s gratifying that KKR sees such incredible value in our brand and that they will continue to support us in doing what we do best – delivering the best vision care to consumers with the highest quality customer service.”

“1-800 Contacts is a customer-centric, technology-enabled business that is bringing more convenience to the optical space,” said Nate Taylor, a partner at KKR and co-head of Americas private equity. “We are excited to invest behind John and his world-class team.”

AEA invests across three sectors – value-added industrials, consumer, and services – and has 70 investment professionals at its headquarters in New York City with additional offices in Connecticut, London, Munich, and Shanghai. AEA was founded in 1968 by the Rockefeller, Mellon, and Harriman family interests and S.G. Warburg & Co.

In December 2019, AEA finalized two new funds with the hard cap close of its seventh flagship fund, AEA Investors Fund VII LP, with total equity commitments of $4.8 billion, and its fourth small business fund, AEA Investors SBF IV LP, with total equity commitments of $877 million.

KKR (NYSE: KKR) makes private equity, fixed income, and other investments in companies in North America, Europe, Asia, and the Middle East. KKR was founded in 1976 and in addition to its New York headquarters has offices in 19 cities around the world.

KKR’s investment in 1-800 Contacts is being made through its Core Investments strategy, which targets longer-term investment opportunities.

1-800 Contacts is being advised by Morgan Stanley & Co. and Jefferies Group.

Private Equity Professional | September 23, 2020

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