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.

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