Two big players in the smartphone accessories industry are merging as Zagg buys Mophie for over $100 million.
Financing with cash and debt to make the purchase, Zagg will also hand over an earn-out on top of the $100 million at the closing transaction.
The terms of agreement are currently pending regulatory approval, and under the outlined conditions of the arrangement, the additional sum will be determined during a 12-month earn-out period that'll take place starting in April until March 31, 2017.
Specifics such as the branding on products in the future remain to be answered, but how will this impact the smartphone accessories market?
First of all, engineering and manufacturing resources in China will be considerably improved because of the consolidation, according to the two. This move will also open up a wider global distribution network with facilities across the United States, Europe and Asia.
Next, customers can expect better products because of the two strong product-development teams that'll start to work together. As mentioned earlier, the branding is still unclear, but in any case, the unified company's brand name will have a prominent presence on the market.
"This strategic combination of two industry innovators with complementary product, brand and distribution platforms will enable us to deliver increased value for our customers and shareholders. We see numerous opportunities to drive revenue growth and increase profitability by leveraging the strengths of both organizations to strengthen product development, improve brand presence, and expand distribution," Randy Hales, president and CEO of Zagg, says.
The market value of iPhone accessories is pegged at $21 billion, and it's expected to grow $2.5 billion more over the next year. Smartphone cases make up about 36 percent of that figure, where it's estimated that 27 percent of customers will purchase a case or skin this year.
Going over the combined sales of the two last year, it amounted to $470 million. In other words, the merger indicates that an even larger entity with a lot of potential to grow further will enter the foray of the smartphone accessories market should the acquisition go through.
"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," Daniel Huang, Mophie CEO, says, outlining the companies' goal clearly and simply.
Considering how smartphones vary in size and design every time a new one comes, the market has been a difficult place to keep pace with. For example, when Apple announces an upcoming next-generation iPhone, accessory makers will have to use their resources to get enough information to prepare for it.
Their choices are simple: either wait for the official release and risk getting left behind other competitors or attempt to find out the specifications to make a consumer-ready supply - often through espionage means. However, the latter is not always the best course of action. Before the iPhone 4s was rolled out, there were rumors of it having a teardrop shape. A company then manufactured 50,000 cases to accommodate that shape. As everyone can imagine, those cases were deemed unusable.
To boil things down, Zagg and Mophie will have the means and resources to dominate the smartphone accessories industry when they come together as one brand.
