Bianchi Int'l / Gregory Packs sold to Armor Holdings for $60 million

Armor Holdings Inc. (NYSE:AH), a manufacturer of security products and vehicle armor systems, has reached a definitive agreement to purchase Bianchi International. Bianchi is a privately held manufacturer of holsters, belts and accessories to law enforcement and military personnel. Bianchi also owns Gregory and supplies the SPEAR rucksack system to the U.S. Special Operations Forces.
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Armor Holdings Inc. (NYSE:AH), a manufacturer of security products and vehicle armor systems, has reached a definitive agreement to purchase Bianchi International. Bianchi is a privately held manufacturer of holsters, belts and accessories to law enforcement and military personnel. Bianchi also owns Gregory and supplies the SPEAR rucksack system to the U.S. Special Operations Forces.

It was reported that Armor will pay $60 million in cash for Bianchi, which will be delivered free of debt. According to a published report, Bianchi recorded $36 million in revenue for the 12-month period ending Sept. 30, 2004. Analysts familiar with the deal told SNEWS® the number was likely close to six times EBITA. The acquisition is subject to regulatory approval, but is expected to close before the end of the year. Once the acquisition is approved, Bianchi will be consolidated into Armor Holdings' products division.

Armor Holdings looks to be on a bit of an acquisition tear. On Sept. 30 of this year, the company announced that it was acquiring The Specialty Group Inc. for $92 million. Specialty Defense owns five manufacturing facilities in Pennsylvania, Kentucky and Tennessee and reported approximately $60 million in revenue for the 12-month period ending Sept. 30. The company also reported Specialty had a funded backlog of $95 million, excluding executable options on existing contracts worth $137 million. Specialty produces the well-known MOLLE (Modular Lightweight Load-Carrying Equipment) pack system, as well as the Warrior Helmets and the Outer Tactical Vest.

Armor Holdings is expected to post revenues of $933 million in 2004.

SNEWS® View: In all the discussion and release language being tossed about, Gregory garnered one mention from Robert Schiller, president and CEO of Armor: "We believe that the consumer market opportunity for the Gregory brand, which enjoys an excellent reputation amongst outdoor enthusiasts, is compelling." We'll take that as a glowing endorsement -- we think.

No doubt that Bianchi was acquired for what the company offers in the short term to the Armor portfolio in terms of diversity and depth. Only one other company can claim the same strength of brand recognition with law enforcement as Bianchi, and that is Safariland -- owned by none other than Armor. Suffice it to say, Armor is now the 1,000-pound gorilla in terms of supplying holster, belts and body armor to law enforcement folks.

Consider too that with the current state of affairs in terms of military action as well as increased focus on homeland defense, producing products for the military right now is quite a profitable venture. However, that isn't going to last forever, and we suspect that is where Gregory comes in -- a first foothold in a market that is decidedly unmilitary. Sure, there will be immediate synergy that will benefit both Armor and Gregory. Specialty Defense has technologies we could see incorporated into consumer packs and designs from Gregory before too long. In addition, Gregory has design expertise that will likely add functionality and improved design to military pack systems that have not exactly kept up with modern mountaineering-tested technologies either -- often a primary reason special forces folks purchase mountaineering gear with credit cards rather than go through military channels.

In the long term, it would not surprise us to see Armor seeking to add one or two more acquisitions that are from the outdoor world -- but they will likely be companies that can also play on the military side of the fence too. Perhaps a knife company? Maybe a company that manufactures health and safety products?

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