KKR Acquires 1-800 Contacts From AEA In A Deal Reported At Over $3.1 Billion

By Amit Chowdhry ● September 24, 2020
  • Private equity company KKR & Co Inc (NYSE: KKR) announced it is buying contact lens company 1-800 Contacts from AEA Investors

Private equity company KKR & Co Inc (NYSE: KKR) announced it is buying contact lens company 1-800 Contacts from AEA Investors. The exact terms of the deal were undisclosed, but rumor has it that it was valued at over $3.1 billion.

AEA Investors had acquired a majority interest of 1-800 Contacts from Thomas H. Lee Partners in a deal announced in December 2015.

A few years ago, KKR had invested in eyewear retail company National Vision Holdings (NASDAQ:EYE). As a public company, National Vision Holdings is now valued at nearly $3 billion.

In the past few years, 1-800 Contacts has made several investments in technology and expanded offerings such as buying vision technology startup 6over6 in late 2019 and launching new app-based offerings including ExpressExam — which enables consumers to renew contact lens prescriptions online in minutes. And the company’s sister brand Liingo Eyewear also launched Rx Reader, an app that extracts optical parameters directly from a pair of prescription glasses.

During the COVID-19 pandemic, many contact lens wearers depended on 1-800 Contacts due to the stay-at-home orders and business closures. As a result, the company experienced a 100% year-over-year increase in new and returning customers. 

And during that period, usage of the ExpressExam app also increased 200% and the Rx Reader app experienced a 700% increase in monthly active users. 

To maintain high-quality customer service, 1-800 Contacts also invested in over 200 new hires in its Utah and North Carolina operations.

KKR is making the investment through its Core Investments strategy — which represents capital targeting longer-term opportunities.

1-800 Contacts is being advised by Morgan Stanley & Co. as the lead financial advisor, Jefferies Group as co-financial advisor, and Fried, Frank, Harris, Shriver & Jacobson as legal advisor. And CapM served as special advisor to 1-800 Contacts. Simpson Thacher & Bartlett is serving as legal advisor to KKR.

KEY QUOTES:

“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. 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.”

— John Graham, CEO of 1-800 Contacts

“1-800 Contacts is a customer-centric, technology-enabled business that is bringing more convenience to the optical space. We are excited to invest behind John and his world-class team.” 

— Nate Taylor, KKR Partner and Co-Head of Americas Private Equity

“We believe 1-800 Contacts’ singular focus on providing a consistent and high quality customer experience, fueled by industry-leading capabilities and telemedicine solutions, positions them well to continue to drive innovation in the category.”

— Felix Gernburd, KKR Managing Director