Draper-based 1-800 CONTACTS announced Tuesday that it will sell its ClearLab business in two deals to Asian companies.
1-800 CONTACTS will sell its ClearLab business, including ClearLab's flat pack technology, to Menicon Co. Ltd., a Japanese company. Its ClearLab manufacturing and support operations will go to a Korea-based contact lens maker, Mi Gwang Contact Lens Co. Ltd.
Together, the deals will bring 1-800 CONTACTS about $32 million in cash and $6.5 million in the Korean company's stock.
"These agreements are the result of an extensive strategic review of ClearLab," Jonathan Coon, CEO of 1-800 CONTACTS, said in a prepared statement. "This anticipated separation of ClearLab from our U.S. retail business will allow management to focus time and attention on growing our U.S. retail business."
ClearLab makes a range of disposable contact lens products, which it distributes in markets outside of the United States.
Under the terms of the agreement, Menicon will acquire certain intellectual property and other assets, including those relating to the company's flat pack technology. Mi Gwang will acquire ClearLab's international manufacturing, distribution and customer support operations, including a Singapore manufacturing facility, along with certain tangible property, intellectual property and other assets.
1-800 CONTACTS President Brian Bethers said that, combined, the deals will provide the company with $32 million in cash and $6.5 million in Mi Gwang stock, plus the prospect of deferred cash payments from Menicon of up to $5 million and other possible earn-out payments over a minimum 15-year term.
1-800 CONTACTS will retain certain liabilities, including ClearLab's existing debt and capital lease obligations, which totalled about $6.5 million as of March 31. In addition, the company has agreed to reimburse Mi Gwang for certain liabilities, including any remaining costs associated with the closure of manufacturing operations in the United Kingdom and the consolidation in Singapore.
The transactions are expected to close by late June. In conjunction with the closing, the parties will terminate their current license agreement.
Proceeds at closing from the transactions will be used to pay off debt and capital lease obligations, Bethers said.
Stock in 1-800 CONTACTS rose 43 cents, or 2.3 percent, to close at $19.21 per share Tuesday on Nasdaq. During the past year, the price has ranged from $13.18 to $20.13.