X-Rite Acquires Pantone

Grand Rapids, Michigan-based X‑Rite, Incorporated (Nasdaq: XRIT), a lead­ing provider of col­or solu­tions for mea­sur­ing, for­mu­lat­ing, match­ing, and sim­u­lat­ing col­or, today com­plet­ed the pur­chase of Pantone, Inc for $180 million.

Forty year old Pantone, Inc., head­quar­tered in Carlstadt, New Jersey, is the world­wide mar­ket leader in col­or com­mu­ni­ca­tion and spec­i­fi­ca­tion stan­dards in the cre­ative design indus­tries. Its flag­ship prod­uct, the PANTONE® MATCHING SYSTEM®, is the de-facto col­or stan­dard in the graph­ic arts, print­ing, pub­lish­ing and adver­tis­ing indus­tries. The com­pa­ny also pro­vides col­or stan­dards and design tools for the fash­ion, home fur­nish­ings, archi­tec­ture, paint, inte­ri­or and indus­tri­al design indus­tries. Pantone gen­er­at­ed rev­enues of approx­i­mate­ly $42 mil­lion in 2006 with adjust­ed EBITDA (earn­ings before inter­est, tax­es, depre­ci­a­tion and amor­ti­za­tion) of approx­i­mate­ly 27% of rev­enues. Earlier this month Pantone released a brand new col­or sys­tem designed to aug­ment and extend the PANTONE MATCHING SYSTEM, the PANTONE Goe System.

X‑Rite antic­i­pates sev­er­al strate­gic, oper­a­tional and finan­cial ben­e­fits from the acqui­si­tion, including:

  • Deepening X‑Rite’s range of offer­ings by adding col­or stan­dards to its lead­er­ship posi­tion in hard­ware, soft­ware and ser­vices solutions 
  • Leveraging X‑Rite’s glob­al pres­ence and dis­tri­b­u­tion capa­bil­i­ties to expand the reach of Pantone’s col­or solutions
  • Enhancing X‑Rite’s rev­enue gen­er­at­ing oppor­tu­ni­ties and fur­ther diver­si­fy­ing its rev­enue base
  • Accelerating tech­nol­o­gy and busi­ness mod­el innovation
  • Achieving sig­nif­i­cant syn­er­gies in mar­ket­ing, oper­a­tions and administration

Although the first year of the com­bined oper­a­tion is expect­ed to incur cash restruc­tur­ing costs of approx­i­mate­ly $5.5 mil­lion, X‑Rite expects to achieve approx­i­mate­ly $6.5 mil­lion of annu­al oper­at­ing expense cost sav­ings dur­ing with­in 24 months. A pos­i­tive growth in cash earn­ings per share is also expect­ed dur­ing the sec­ond year.

“We are very excit­ed to wel­come Pantone into the X‑Rite family,” stat­ed Tom Vacchiano, X‑Rite’s CEO. “We expect the com­bi­na­tion of our two busi­ness­es to fur­ther strength­en X‑Rite’s posi­tion as the mar­ket’s lead­ing and most com­pre­hen­sive col­or man­age­ment solu­tions provider. The group­ing of our broad tech­nol­o­gy plat­forms and stan­dards and an expand­ed cus­tomer base should help us fur­ther sev­er­al of our strate­gic objec­tives, includ­ing dri­ving inno­va­tion and growth and fur­ther diver­si­fy­ing our business.”

Pantone will become a new busi­ness unit with­in X‑Rite. Current Pantone lead­ers will con­tin­ue to play key roles in the orga­ni­za­tion, accord­ing to X‑Rite.

The $180 mil­lion acqui­si­tion was fund­ed exclu­sive­ly with cash, financed through new bor­row­ings. X‑Rite’s exist­ing debt was financed through a new debt pack­age total­ing $415 mil­lion pro­vid­ed by Merrill Lynch, Fifth Third Bank, National City Bank, LaSalle Bank and GoldenTree Asset Management, LP.