1-800 Contacts, backed by AEA, THL, hits the auction block

AEA, which snapped up a majority stake in the contact lens retailer in 2016, has engaged Morgan Stanley and Jefferies for financial advice.  

1-800 Contacts, the AEA Investors-backed online retailer of contact lenses, has kicked off a sale process, according to four people familiar with the matter. 

Morgan Stanley and Jefferies are providing financial advice on the process, sources said.  

The Draper, Utah-based company generates approximately $160 million in EBITDA, with the process expected to produce a mid-to-high teens EBITDA multiple, sources said. That would suggest a potential valuation of $2.4 billion-plus based upon a 15x multiple on the low end.

It is unclear if the process is targeting a sponsor or strategic outcome, though large buyout funds are in the mix, some of the sources said. 

Founded in 1995, 1-800 Contacts is the nation’s largest direct-to-consumer retailer of contact lenses. 

For New York private equity firm AEA, the process comes five-plus years into its investment. AEA, representing 1-800 Contacts’ fourth owner since 2007, bought a majority stake in December 2015 from Thomas H. Lee. THL initially retained a 20 to 30 percent stake in the company, sources said at the time. 

The 2015 transaction commanded an enterprise value upward $1 billion, equating to an approximately 12x EBITDA multiple. 

THL’s investment in 1-800 Contacts dates to February 2014, when it acquired the company from health insurance giant Anthem. 

Anthem’s sale of the e-commerce retailer came less than a couple years after it shelled out $900 million for 1-800 Contacts and Glasses.com. Anthem bought the eyewear businesses from New York PE firm Fenway Partners, which had taken 1-800 Contacts private in June 2007 for approximately $340 million. 

AEA, THL, Morgan Stanley and Jefferies declined to comment. 1-800 Contacts did not return requests for comment. 

Action item: check out AEA’s latest Form ADV.