Acme United Buys C-Thru Ruler Assets – Expected to be Accretive in 2012

C-Thru Ruler line of products

The acquisition of C-Thru Ruler is expected to be immediately accretive for Acme United.

After the successful acquisition of Pac-Kit early last year, Acme United (ACU – $10.10) has again expanded its product portfolio by acquiring certain assets of The C-Thru Ruler Company, a supplier of drafting, measuring, lettering and stencil products.

Acme paid approximately $1.47 million in an all cash transaction for the inventory, tooling, brands, and other intellectual property of C-Thru. However, it didn’t buy the Déjà Views paper crafting and scrapbooking brand of C-Thru as that doesn’t belong to its core business. In 2011, C-Thru’s revenues were about $2.7 million with gross profits reaching roughly $1 million. As a result, the acquisition is expected to be immediately accretive for Acme United.

The C-Thru Ruler Company was formed in 1939 in Hartford, CT by Jennie Zachs, a teacher, who saw the need for transparent measuring tools, like rulers, triangles, curves, and protractors. The Company developed a strong reputation in the school and craft markets for high quality measuring devices, and for specialized products for drafting, designing and drawing.

Westcott Synergies

Looking at C-Thru’s products, its obvious there are plenty of synergies with Acme’s existing Westcott brand, which manufactures rulers, scissors, iPoint pencil sharpeners and many other school, craft and office tools.

First of all, the margins of both C-Thru and Westcott stand to improve thanks to cost savings from the combined purchasing power for raw materials. C-Thru will also benefit from Acme’s existing manufacturing and sourcing capabilities in China.

Secondly, because C-Thru will be integrated in an already well established organization, the acquisition will be largely absorbed by existing staff and facilities within Acme United. One additional employee may be hired.

Moreover, C-Thru’s biggest customers are Michaels, A.C. Moore, Jo-Ann Fabric & Craft, Hobby Lobby, etc. These are all chains which currently only carry a small amount of the Westcott product line, leaving plenty of room for expansion.

Conclusion

With C-Thru Ruler, Acme United adds another well known brand to its portfolio. Acme’s management has an eye for acquiring relatively small companies which complement its current line of business. By adding the necessary capital, manpower and expertise, these smaller brands can really take off and flourish.

Pac-Kit, for example, increased its revenues from $4.5 million to $5.2 million, or up more than 15%, in the first 10 months after it was acquired by Acme United. In that same period, Pac-Kit’s margins increased from around 27% to over 30% thanks to the increased buying power.

Knowing that C-Thru has a successful line of products and an existing customer base, and that only few extra costs will have to be made to integrate the brand, we expect the acquisition to have an immediate positive impact on Acme’s sales and earnings in the coming quarters.

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For important disclosures, please read our disclaimer.

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