3 Reasons Why Acme United’s Acquisition of First Aid Only Makes Perfect Sense

Acme United (ACU – $17.50) acquired First Aid Only, Inc, a supplier of first aid kits, refills, and safety products, for $13.8 million in cash. First Aid Only reached revenues of $17.3 million in 2013 and is expected to be immediately accretive.

First Aid Only founder Mark Miller started the business in 1988 out of his garage. The company pioneered consultative selling and support of first aid items to large corporate customers, and has since become a recognized industry leader.

Today, the company employs 100 people and operates a modern, 54,000 square-foot facility in Vancouver, WA. It boasts a distributor network of more than 1,000 people and supplies first aid goods to well-known businesses such as McDonalds, Subway and Costco. All first aid kits sold by First Aid Only are built in the United States and sold under the First Aid Only brand.

Integrating Three First Aid Brands

Before the acquisition, Acme United already owned two first aid brands, Pac-Kit and PhysiciansCare. Pac-Kit sells first aid kits, industrial stations and refills, emergency medical travel and recreational kits for the industrial, safety, transportation and marine markets. PhysiciansCare’s products are somewhat similar to Pac-Kit’s, but it also carries a successful branded line of over-the-counter medications, including the active ingredients aspirin, acetaminophen and Ibuprofen, etc.

Adding First Aid Only obviously brings plenty of cost saving opportunities, but it also raises the question if Acme really needs three separate first aid brands. It may be too early to tell what’s going to happen with the three brands, but it would be logical if the production of Pac-Kit first aid kits, which is currently handled in a dated leased facility in Norwalk, CT, is moved to the modern First Aid Only building in Washington. Trained personnel is already present in Washington and Acme could end the lease on the building in Norwalk.

Next to the Pac-Kit move, we see several more reasons why the acquisition makes perfect sense.

In recent quarters, Acme’s first aid business has shown strong growth in the industrial safety market and office channel. This is mainly because traditional office supply customers, like Office Depot and OfficeMax, look to offer products outside their core office supplies. So Acme is buying a business in a sector that’s growing at rates above average. In addition, First Aid Only is profitable, so it will contribute to Acme’s bottom line. Walter C. Johnsen, Acme’s Chairman and CEO, said “Combined first aid, safety, and over the counter medications revenues at Acme United are expected to be approximately $40 million in 2014.”
Another major advantage of the acquisition are the expected cost savings as a result of the higher combined volumes that Acme will achieve. This should lead to lower negotiated freight costs, increased purchasing power for raw materials and access to new customers.

Conclusion

Acme’s previous acquisitions, C-Thru Ruler and Pac-Kit were integrated very smoothly into the Company with cost savings and increased profit margins as a result. Although First Aid Only is much larger, we’re convinced that the experience form those acquisitions is a major positive. In addition, we heard that the entire management team and all personnel of First Aid Only plans to stay, which forms a solid basis for a smooth transition.

We mentioned in our latest Company Report on Acme United that the Company’s balance sheet was very strong and that there was plenty of room for an acquisition. The Company took advantage of this opportunity and acquired a sizeable and well-known first aid distributor, which will be accretive to earnings.

No details were given about First Aid Only’s profits in 2013, but we’ll try to find out everything we can about the acquisition in our interview with Mr. Johnsen next week. Profile Page

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