Economy and Education & Workforce Development

Ring maker remakes industry with big buyout: Herff Jones' purchase of American Achievement to narrow roster of rivals to two; deal may be worth $700M

May 26, 2008

Herff Jones Inc.'s latest acquisition is a whopper that will remake the competitive dynamics of its niche industry-the sale of high school rings, yearbooks and other products that help mark educational milestones.

The Indianapolis-based company this month agreed to buy American Achievement Group Holding Corp., a deal that would reduce the roster of Herff's major competitors from three to two.

Herff has $511 million in annual revenue, while American Achievement has $315 million. Terms were not disclosed, but Dow Jones' LBO Wire newsletter and TheDeal.compegged the purchase price at $600 million to $700 million. The seller is New York-based investment firm Fenway Partners Inc.

It's not clear whether Herff, an employeeowned firm, will consolidate operations, reducing jobs. The Indianapolis company, founded in 1920, has 4,000 workers, including 500 in Indiana. American Achievement has 2,500 employees.

A Herff official declined to comment because the deal has not closed, and a spokesman for the companies, Jonathan Doorley, would not address the consolidation issue head on.

"During this period, both companies intend to operate business as usual and continue to compete vigorously in the marketplace," he said.

In a written statement, American Achievement CEO Don Percenti said, "The combined company will be better positioned to compete for sales opportunities and capture operating efficiencies while better serving customers."

Herff may be pouncing at an opportune time. American Achievement, which sells products under such brands as ArtCarved and Balfour, is weighed down with more than $500 million in debt. In the fiscal year that ended last August, it lost nearly $33 million.

"Sometimes in periods of softness for strong competitors, it's their moment to pick up a bargain," said George Farra, of Woodley Farra Manion Portfolio Management Inc., a local investment firm.

Assuming the deal closes, Herff will have two remaining major competitors: Missouri-based Walsworth Publishing and Armonk, N.Y.-based Visant Holding Corp., the No. 1 player. Visant, which owns the

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5,700 employees.

American Achievement marks the third acquisition for Herff in the past three months. In April, it bought Virginia-based Framing Success Inc., a supplier of custommade diploma frames, mainly for college and professional certifications. A month earlier, Herff Jones bought St. Petersburg, Fla.-based Murphy Cap & Gown Co.

Now might seem like an awkward time to expand, given the weak economy, the housing slump, tight credit markets and soaring gas prices. But the class ring and school market is more resilient than it might appear, experts said.

"Major milestone life cycle events such as weddings, anniversaries, graduations, etc., happen regardless of the economy, so jewelry companies that are focused on product to celebrate those occasions are naturally going to be a bit more recessionproof than companies whose product is strictly discretionary," Hedda Schupak, editor-in-chief of trade publication Jewelry Circular Keystone, wrote in an e-mail.

Herff has been on a quest to improve efficiency in recent years. In 2004, it closed an Indianapolis ring-making plant, eliminating 150 local jobs. It consolidated that work into a newer plant in Rhode Island.
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