KKR to buy 1-800 Contacts for $3bn

December 2020 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

December 2020 Issue

As part of a growing demand for digital sellers, global investment company KKR is to acquire online contact lenses retailer 1-800 Contacts from private equity (PE) firm AEA Investors in a $3bn-plus transaction.

The sale of 1-800 Contacts to KKR follows many years of strong growth and technology innovation for the vision brand, which AEA Investors bought in 2016. KKR is making the investment through its ‘Core Investments’ strategy, a platform representing capital targeting longer-term opportunities.

According to 1-800 Contacts, it is the largest retailer of contact lenses in the US and has paved the way for a new generation of direct-to-consumer (DTC) brands. Moreover, the company has served more than 20 million customers for the last 25 years, offering a growing portfolio of innovative 1-800 Contacts brands, including Liingo Eyewear, 6over6, Boomerang and Premium Vision.

Innovation is central to 1-800 Contacts’ strategy and differentiation as a pioneering DTC brand. In recent years, the company has made significant investments in technology, expanding its offerings by acquiring vision technology start-up 6over6 in late 2019 and launching new app-based offerings, including ExpressExam.

“1-800 Contacts was founded 25 years ago to offer consumers a better way to buy contact lenses,” said John Graham, chief executive of 1-800 Contacts. Since the very beginning, we have kept the customer at the centre of everything we do.”

During the peak of the coronavirus (COVID-19) pandemic shutdown, many contact lens wearers turned to 1-800 Contacts in place of traditional brick and mortar sellers. As a result, the company experienced a 100 percent year-over-year (YOY) 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. In order to maintain the highest quality customer service, 1-800 Contacts also invested in more than 200 new hires in its Utah and North Carolina operations. “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,” said Nate Taylor, a partner at KKR.

A leading global investment firm that manages multiple alternative asset classes, including PE, credit and real assets, with strategic partners that manage hedge funds, KKR invests its own capital alongside the capital it manages for fund investors and provides financing solutions and investment opportunities through its capital markets business.

“It is 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,” added Mr Graham.

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

Felix Gernburd, managing director at KKR, concluded: “We believe 1-800 Contacts’ singular focus on providing a consistent and high quality customer experience, fuelled by industry-leading capabilities and telemedicine solutions, positions them well to continue to drive innovation in the category.”

Fraser Tennant