While consumers love smartphones and tablets, there is one aspect of the mobile business that is sometimes overlooked -- accessories. There are countless companies producing things like cases, cables, keyboards, and more for our precious devices. Quite frankly, that is part of the fun -- customizing the experience.
Two of the more popular such accessory manufacturers, ZAGG and mophie, are merging. Technically, the former is acquiring the latter. Is this a smart move?
"ZAGG has agreed to pay $100 million at closing, plus the amount by which 5X Adjusted EBITDA exceeds $100 million over a 12-month earn-out period. The 12-month earn-out period will run from April 1, 2016 to March 31, 2017. The purchase price at closing will be funded with cash and debt. The earn-out will be financed through a combination of cash, debt and up to $5 million in ZAGG common stock. The agreement also allows mophie to collect approximately $15 million from certain pre-merger tax and custom duties refunds and real estate sale proceeds, if received post-closing", says ZAGG.
Daniel Huang, mophie Chief Executive Officer, says, "ZAGG and mophie represent two companies with strong brands and shared values. The rationale for the merger is powerful and the combination enhances each company's growth strategy while offering a truly compelling value proposition. Together, we intend to build on our market leadership to deliver great products, advance the brand strength, and increase our global presence in mobile accessories".
ZAGG shares the potential benefits of the merger.
- Enhanced Capabilities for Profitable Growth: The combination will create an improved technology platform, strengthened engineering and manufacturing resources in China, along with a global distribution network with facilities in the U.S., Europe, and Asia.
- Best in Class Product Development: Retail customers and mobile consumers will benefit from the alignment of strong product development teams that are focused on delivering Creative Product Solutions.
- Improved Brand Strength: The brand strength of the combined companies will be leveraged to increase consumer awareness through an expanded global platform and focus on always being the Preferred Brand.
- Expanded Global Distribution Channels: The combined entity intends to further increase its Targeted Global Distribution through a broader retail presence and new product introductions.
- Improved Financial Profile: The combination is expected to increase net sales and adjusted EBITDA with a focus on leveraging operational efficiencies and performance.
Marketing speak aside, this should benefit the companies as they can share resources. ZAGG now owns a well-known brand -- many people leverage mophie battery cases to get through the day. With Apple now producing its own such case, it is clear that this is an important -- and probably lucrative -- market.
The question, of course, is will this either benefit or hurt consumers? This is less clear. A reduction of competition in the market is often a bad thing, but these two companies weren't really competitors outside of portable battery packs. From the consumer standpoint, I'd say it is inconsequential.
What do you think about this merger? Tell me in the comments.
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