A MAN WITH A VISION CONSOLIDATES THE EYE-CARE BUSINESS
(FORTUNE Magazine) – Hey, no fair! This guy grew up riding ponies and collecting butterflies on an English country estate. He went to fancy private schools. He learned dealmaking from his father. Old money is usually more comfortable playing croquet than clawing through the world of commerce, but a rich inheritance didn't stifle the entrepreneurial spirit of Martin Franklin, the 30-year-old CEO of Benson Eyecare. In less than three years he has built an empire of eye-care companies and become one of the youngest CEOs of a company listed on the New York Stock Exchange.
Franklin had a clear idea of what to do with this highly fragmented, $30-billion-a-year business: Consolidate it. He has created a vertically integrated company by buying up bunches of businesses, including Foster Grant sunglasses. And he has made Benson extremely efficient by centralizing operations and squeezing suppliers for price breaks. The demographics are nothing if not eye-catching. Nearly 95% of U.S. adults over 45 wear corrective lenses, a group expected to grow 23%, to 96 million, by the end of the decade, as aging boomers make a run on reading glasses, bifocals, contact lenses, and other eyewear.
Benson stock--its symbol is EYE--has climbed from 37 cents a share when Franklin bought the company in 1992 to more than $7 today. Dorothy Parker might have said that investors don't make passes at companies that sell glasses, particularly when the company faces strong competitors in a tough-margin business. But then Parker didn't know George Soros, or outfits like Fidelity, Cumberland Associates, and General Electric's pension fund, all of which own Benson stock or convertibles. Franklin owns about 15% of the company.
Gregarious and modest, Franklin didn't stumble into success. He got there by design. "Some kids grow up wanting to be firemen," he says. "I grew up wanting to be a businessman like my dad." Large loafers to fill: Franklin's father, Roland, ran the family's merchant bank, Keyser Ullman, and later was banker to corporate raider Sir James Goldsmith during his high-pirating days in the 1980s. Franklin the elder, who built a fortune of well over $30 million--and has since retired to Jumby Bay, an isle off Antigua--moved his family to America when his son was 15; he had become convinced that capitalism's future lay in the U.S., not in England. Some of Martin's five siblings got the entrepreneurial bug too. An elder sister, Melanie, co-founded Safety Zone, a flourishing mail-order company that sells everything from burglar alarms to carbon monoxide meters.
Martin graduated from the University of Pennsylvania with a BA in economics and political science, and went to work as an investment banker at Rothschild. He soon formed a new firm with his father, and the pair embarked on a dealmaking spree that included buying and selling Grand Union and a major British conglomerate called DRG. But Dad wanted out to Jumby Bay, and Martin says he "got tired of playing Mr. Breakup. I wanted to build, to create."
So he set his sights on eye care. Franklin and a partner bought Benson--at the time just a spec of a company--from GE's pension fund for $2.3 million. Since then, Franklin has acquired nine other companies, including one that produces lens blanks (which are made into lenses), a wholesale lab that grinds and processes lenses, and several distributors of "readers," inexpensive magnifying lenses sold by mass-merchandisers. He also got himself some cheap sunglasses by buying three companies with a dozen or so brands, including Foster Grant. Says Franklin: "The Foster Grant brand has languished, but we're counting on its tremendous name recognition to revive it this spring."
Benson, in Rye, New York, is now one of the most diversified companies in the eye-care business. Last year it earned $8.2 million--41 cents a share--on revenues of $169 million. It has a P/E of 17, vs. 16 for the S&P 500. Smith Barney analyst Stephen Handley looks for profits to double and per share net to climb to 60 cents next year, on sales of $270 million. "Our story is new and a little complicated," says Franklin. "That's why our stock hasn't moved up much recently. We're looking to get the word out." To help in that department, Franklin lured Ray Troubh, a former partner with Lazard Freres and a director of a dozen companies, to serve on his board.
Franklin has made about $35 million on his original $1.2 million stake. Any temptation to take his cash and move on? "No way. I'm just getting started," he says. "Leaving would be very disingenuous. At my age I need to build credibility on Wall Street, not lose it." But what about, well, a sexier business than spectacles? "What could be sexier," he retorts, "than making a lot of money?"