Rodenstock sponsor Compass puts planned sale on ice after Jefferies appointment, sources say

14 May 2020 - 09:03 am UTC

by Amy-Jo Crowley and Ryan Gould in London

Compass Partners has put its planned sale of German ophthalmic lens and eyewear manufacturer Rodenstock on ice after the London-based sponsor appointed Jefferies to sell the business in February, according to three sources familiar with the matter.



The American investment bank landed the mandate to sell Rodenstock following a beauty parade, one of the sources said.



Compass’s decision to sell Rodenstock is not linked to COVID-19 distress and is expected to remain on hold until market conditions begin to normalise, according to two of the sources. Spokespeople for Compass and Jefferies declined to comment.



The lens maker, which last week secured a fresh backstopped equity injection of EUR 75m from its sponsor to help navigate COVID-19-related liquidity issues, will be marketed off approximately EUR 110m EBITDA, the sources said.



Rodenstock has an EBITDA margin of 23% and a 5% growth rate, one of them added.



Compass Partners’ injection of equity comes after S&P Global downgraded Rodenstock to B- stable on April 28, with the ratings agency citing weaker projected demand following the closure of retail stores in key markets.



Without expected sponsor support, the company could breach the 30%-draw covenant on its EUR 20m revolving credit facility, S&P said. Rodenstock had about EUR 31m of cash available at the end of February, with the revolver drawn in full, the report noted.

 

The new funds from the sponsor will be drawn if and when the company should need them, Mergermarket’s sister publication Debtwire reported today.



According to one of the sources, the nature of Rodenstock as a manufacturer of eyewear makes the group “resilient” at a time when many other consumer-retail businesses are facing uncertainty surrounding the route out of national lockdowns.



In Germany, opticians have remained open throughout the coronavirus crisis, the second source said, but added that the sellside might see benefit in playing up Rodenstock as a healthcare play. Jefferies landed the sale mandate on the strength of its healthcare team, said the third source.



Rodenstock is likely to attract interest from sponsors and trade players across the healthcare and pharma space that can identify synergies, the third source said. The business characterises itself as a med-tech offering given that it predominantly produces lenses, he added.



Logical comparables for the group include Japan’s Hoya and Ray-Ban-owner EssilorLuxottica, which is set to takeover global eyecare retailer GrandVision, the same source said. Rodenstock could fetch an EV/EBITDA multiple in line with these peers, he argued.



One of the sources said that Compass is seeking a valuation north of EUR 600m for the business, but the third source said the valuation would be considerably higher than that sum since Rodenstock’s listed peers trade at 10x EBITDA and above.



The Munich-headquartered group booked EUR 26.7m in EBITDA “before one-off effects” incurred in connection with a refinancing agreement and severance payments based on revenues of EUR 300m for FY18, according to a company accounts filing.



Compass Partners took full control of Rodenstock in 2018 after purchasing a majority stake in the business from Bridgepoint in 2016. Founded in 1877, the company has a workforce of approximately 4,200 worldwide.



Rodenstock did not respond to requests for comment.