DRAPER — A Utah company that made ordering contact lenses by phone famous — 1-800 CONTACTS — announced Monday that it will be acquired by New York-based private equity firm Fenway Partners in a $340 million deal.
Fenway will pay $24.25 per share for the Draper-based company. On Monday, shares of 1-800 CONTACTS soared to $24, up $3.92, or 19.5 percent, at closing on Nasdaq.
The transaction is still subject to approval by 1-800 CONTACTS' stockholders and is expected to close in the third quarter of this year.
Jonathan Coon, chief executive officer of 1-800 CONTACTS, said the costs associated with being a publicly traded company had grown prohibitive.
"It's really been expensive for us to be a public company," Coon said. "It's a big distraction being a public company, and we're a small business.
"For us it will be great to be able to just focus on what we do and have a partner that has a five-year outlook as opposed to a three-month outlook."
Coon said he expected the company to save a couple of million dollars annually in directors' and officers insurance and other costs associated with accounting and professional fees associated with the Sarbanes-Oxley Act, a federal law passed in 2002 in response to a number of major corporate and accounting scandals.
Kevin McCallum, a spokesman for 1-800 CONTACTS, said the executive team at the company will remain the same. Coon will continue in his position as chief executive officer, and the company headquarters will remain in Draper.
In addition, no layoffs of the company's roughly 680 U.S. employees is expected at this time, McCallum said.
1-800 CONTACTS has reported net losses since 2002, according to filings with the U.S. Securities and Exchange Commission. In 2006, the company reported a net loss of $22.5 million, or $1.68 per diluted share.
McCallum blamed the company's net losses on its efforts to start ClearLab, a developer and manufacturer of daily contact lenses based in the United Kingdom, which has since been consolidated to Singapore and last week was sold to Menicon Co., a Japanese manufacturer of contact lenses, and Mi Gwang Contact Lens Co. of South Korea.
"The U.S. retail business is healthy. It makes a lot of money," McCallum said. "The cash that we generate we've been using to fund the start-up of the ClearLab operation."
1-800 CONTACTS sells roughly 2 million contact lens orders a day.
Tim Mayhew, managing director of Fenway Partners, said in a prepared statement that 1-800 CONTACTS is a "terrific business that fits well with our investment strategy."
Fenway Partners has $1.7 billion under management and has invested in companies like RoadLink USA, an independent provider of intermodal trucking services in the United States, and Simmons, an Atlanta-based distributor of bedding products.
E-mail: danderton@desnews.com